Members of the Leadership Conference on Civil and Human Rights and the National Council of La Raza wrote a letter recently to Federal Housing Finance Agency (FHFA) Director Melvin L. Watt. The letter questions the role that Fannie Mae and Freddie Mac will play in the housing market in the future in terms of promoting fair and affordable housing.
The Leadership Conference and the National Council came to the consensus that "bringing the conservatorship to an end so that Fannie and Freddie may step up their role in promoting homeownership" will need to happen to push fair and affordable housing.
The two organizations noted in the letter that homeownership is key to moving more Americans into the middle class, but much concern remains despite economical improvements since the 2008 financial crisis.
Minority communities are not likely to experience financial benefits of homeownership benefits, as a 30.4 percent gap remains between black and white homeownership has only widened over the last ten years.
"We must do all that we can to enact policies that will help reverse these disturbing trends," the organizations wrote in the letter. "FHFA can lead on this, do it responsibly, and do it without putting taxpayers at risk."
The Leadership Conference on Civil and Human Rights and the National Council presented two factors in the letter that will help meet this goal:
"First, particularly given the demise of GSE “overhaul” legislation on Capitol Hill, it is clear that any successful policy to promote affordable homeownership must involve strong leadership into the future by Fannie Mae and Freddie Mac. These entities will be 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. The proposed bills in the 113th Congress to eliminate the GSEs would have been counterproductive, negatively impacting communities of color and young people, and impeding 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 proceeds with its decisions on affordable housing policies, those policies 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 last month on the expansion of lending to middle class borrowers, but we note that this expansion will require capital. We also 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 Rep. Maxine Waters (D-California) describes as seemingly “permanent conservatorship,” where they are unable to rebuild capital."
The organizations stated that the homeownership must be increased in the communities they represent, but in order for this to happen the conservatorship must end so the GSEs can rebuild their capital.
"Both agencies have become profitable, and could remain so while still giving the taxpayers a large return on the government’s investment," the letter stated. "We are not suggesting this be done without significant reforms to ensure that all markets are being served fairly, and without important taxpayer safeguards"
"We look forward to working with FHFA to formulate a plan that increases homeownership for more Americans while further reducing the liability 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," the letter concluded.
Click here to read the full letter.