Letter to FHFA on Fannie Mae, Freddie Mac, and Affordable Housing Goals
Recipient: The Honorable Melvin L. Watt
The Honorable Melvin L. Watt, Director
Federal Housing Finance Agency
400 7th Street SW, Ninth Floor
Washington, DC 20024
Re: RIN 2590-AA65: 2015-2017 Enterprise Housing Goals
Dear Director Watt:
On behalf of The Leadership Conference on Civil and Human Rights, we write in response to the Federal Housing Finance Agency’s (FHFA) request for comment regarding the 2015-2017 Enterprise Housing goals’ proposed rule. We greatly appreciate the leadership you have shown to date at FHFA to ensure the financial safety and soundness of the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and for policies that will help to secure a fair and affordable housing market.
Homeownership is a critical means for building financial security and for moving more Americans into the middle class. While our national economy has significantly improved since the financial crisis of 2008, we remain concerned about the mobility of the middle class. Since the 2008 housing crisis, communities of color have moved farther away from being able to achieve equity and prosperity through homeownership. More specifically, the black-white homeownership gap over the past decade has widened significantly, from 26.1 percent to 30.4 percent. Similarly, young people are less likely to become homeowners in this new economy. The perception that homeownership is unavailable is also higher in communities of color. Sixty-three percent of Hispanic homeowners believe it would be difficult to get a home mortgage today, compared to 40 percent of the general population of owners. We must do all that we can to enact policies that will help spur economic growth and ensure that more low- and moderate-income Americans can achieve the American dream of homeownership. FHFA can lead on this, do it responsibly, and do it without putting taxpayers at risk.
We believe there are two pieces to meeting these goals. First, particularly given the likely demise of GSE “overhaul” legislation on Capitol Hill, it is clear that any successful policy to promote affordable homeownership must involve strong leadership by Fannie Mae and Freddie Mac. These agencies are vitally important to the continued growth of our nation’s housing market, and to the ability of consumers to continue obtaining affordable, 30-year, fixed-rate mortgages. In its current form, pending legislation to eliminate the GSEs would be counterproductive; it would negatively impact communities of color and young people, and it would impede our ability to grow our nation’s middle class.
Second, the GSEs require capital if they are to serve their historic mission. As your agency embarks upon decision-making on affordable housing policy, it naturally must be balanced with FHFA’s statutory obligation as conservator to the safety and soundness of these enterprises. We applaud FHFA for its announcement this week on the expansion of lending to middle class borrowers, but this expansion will require capital. We note that some of the current proposals to raise g-fees and to impose new requirements on private mortgage insurers will increase the costs of borrowing, and would still fall short of building the capital needed to grow a robust and healthy housing market. This is especially true given the GSE’s status in, what Congresswoman Maxine Waters (D-CA) describes as seemingly “permanent conservatorship,” where they are unable to rebuild capital.
In light of this, in order to ensure the best path forward for increasing homeownership in the communities we represent, we believe it is vital to initiate serious discussions about unwinding the conservatorship and allowing Fannie and Freddie to begin rebuilding their capital. Both agencies have become profitable, and could remain so while still giving the taxpayers a large return on the government’s investment. We are not suggesting this be done without significant reforms to ensure that all markets are being served fairly, and without important safeguards for the taxpayer. Fannie and Freddie can be fixed; discarding them in entirety would be a colossal mistake. Under the proposed replacements for Fannie Mae and Freddie Mac, such as the committee-passed versions of the Johnson-Crapo or Hensarling bills, it is clear to us that the current affordable housing benefits provided by the GSEs (see attachment “GSE Affordable Housing Activities”) simply cannot be replicated in a new untested system.
We look forward to working with FHFA to formulate a plan that increases homeownership for more Americans, while further reducing the liability as a result of another catastrophic event on the backs of taxpayers. Exploring an end to the conservatorship and allowing the enterprises to build capital should be an important component of this effort.
Thank you for your consideration of our views. If you have any questions, please contact either of us, or Senior Counsel Rob Randhava, at (202) 466-3311.
President & CEO
Executive Vice President