New York, NY – November 19, 2013 – (RealEstateRama) — Congresswoman Carolyn Maloney (NY-12), Ranking Member of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises (GSE), hosted a roundtable today at Baruch College in Manhattan to discuss proposed changes to federal housing and mortgage finance laws with national leaders in the real estate and mortgage industries, as well as housing experts. The panelists weighed on in the national implications of completely removing the federal government’s financial backing of Fannie Mae and Freddie Mac – a current proposal in Congress that could result in mortgages becoming far too expensive for many Americans.
Congresswoman Carolyn Maloney in National News |
Congresswoman Carolyn Maloney in Social Media |
“Housing is a cornerstone of our national economy and a major industry in New York City. I’ve heard numerous stakeholders tell me that they are deeply concerned about the possibility of removing the federal government as a guarantor of Fannie Mae and Freddie Mac mortgages. Congress continues to debate major reforms to our country’s housing finance policies, including the future of Fannie and Freddie, which could have a significant impact on the housing market in New York City, and nationally. Congress can’t make these changes in a vacuum,” said Congresswoman Maloney.
“As the Ranking Member of the subcommittee that oversees Fannie and Freddie, I strongly support reforms to better protect taxpayers. However, I believe that some government role remains necessary to ensure that affordable mortgage financing remains available for single-family homes and multi-family developments and that’s what I heard today,” said Congresswoman Maloney.
New York City is the financial capital of the world and real estate is a major industry here. Completely removing the federal government as a guarantor of Fannie and Freddie mortgages could have detrimental impacts on the industries, and make the 30-year fixed-rate mortgage unaffordable for millions of Americans.
A number of the panelists who participated in today’s roundtable in Manhattan expressed the following concerns with some of the pending housing finance reform legislation:
“It makes very little sense to change the role of Fannie and Freddie as a source of permanent financing for multifamily housing, which has been profitable as well as assuring liquidity. I would also like to see a revival of programs that provide 100 per cent financing for nonprofit housing. The Federal Section-202 Program, which had provided 100% loans to nonprofit developers of senior housing, had few, if any defaults, over its 54 year history. Other state and local programs had equally good results. Even with 100 per cent financing, it takes years of effort to develop housing and consistent oversight to sustain proper upkeep. Labor, passion and due diligence should be viewed as ‘skin in the game,’” said Carol Lamberg, Executive Director of Settlement Housing Fund.
“One of our primary concerns with the proposed legislation is that it includes provisions to eliminate many affordable housing programs for first-time homebuyers. These affordable housing programs are extremely important to our members, most of whom are municipal workers. Without these programs, many of our members will not be able to achieve their dreams of home ownership and may not be able to afford to live in the greater New York City area. These same potential homebuyers would also be negatively impacted by the possible dramatic interest rate increase expected when Fannie and Freddie are eliminated and the possible elimination of the 30-year fixed rate mortgage, both of which are also part of this legislation. We need to ensure our members can obtain affordable rates and homes in our area and not pass legislation, such as GSL legislation, that could very likely have the opposite effect,” said Anie Akpe-Lewis, Vice President of Mortgage Operations at Municipal Credit Union.
“In seeking to reform our current housing finance system, lawmakers in Congress should abide by one of the fundamental tenets of the Hippocratic Oath: Do no harm. Eliminating Fannie and Freddie while relying on the power of free markets to regulate housing finance will only harm our current system and lead to a wave of unintended consequences that will be particularly detrimental to low- and moderate-income families,” said Ken Inadomi, Executive Director of New York Mortgage Coalition.
“Any proposal to scrap or revamp Fannie Mae and Freddie Mac must include provision for creditworthy low- and moderate-income families; especially people of color, to purchase homes and build financial assets that will propel them up the ladder of opportunity and lay a solid foundation for future generations,” said Denise Scott, Managing Director of Local Initiatives Support Corporation (LISC) New York City.
“To be truly effective, housing finance reform must address four core issues. It should level out the booms and busts of the housing market; provide an explicit government guarantee of certain mortgages; ensure equal access to all qualified borrowers; and provide a stable source of funding for affordable housing initiatives. The PATH Act, by focusing on privatization, does not adequately address any of these issues,” said Christie Peale, Executive Director of Center for NYC Neighborhoods.
“If the PATH Act becomes law, the dream of homeownership will be much harder to achieve for most families in New York and nationwide. Protecting the 30-year fixed-rate mortgage and preserving access to affordable mortgage products like low-down payment FHA loans is critical to ensuring access to the American Dream for millions of hardworking families. We must protect the financial bedrock of our housing economy in America,” said Susan Greenfield, a real estate broker and a member of the National Association of Realtors, expressing her opinion and that of NAR’s members.
Congresswoman Maloney outlined several proposals being considered by Congress during today’s roundtable.
She discussed HR 2767, the PATH Act, which narrowly passed the House Financial Services Committee on a partisan vote and over Rep. Maloney’s strong objections. The PATH act would end Fannie Mae and Freddie, government sponsored enterprises (GSEs) that buy mortgages from banks and credit unions to free up credit for homebuyers, and eliminate any government role in the secondary mortgage market. This would effectively kill the 30-year mortgage as we know it and dramatically reduce financing for affordable housing and multifamily developments.
Congresswoman Maloney also discussed what is happening in the Senate, including a bill by Senators Bob Corker (R-TN) and Mark Warner (D-VA) that would replace Fannie and Freddie with a new public-private partnership that limits risks to taxpayers but allows for the government to continue playing a limited role in the secondary mortgage market.
Additional Background:
During the financial crisis and great recession, Fannie Mae and Freddie Mac needed to be bailed out by taxpayers and taken over by the federal government because too many of the mortgages they secured had failed. Some $187 billion of taxpayer money was spent to make sure these companies didn’t fail, because failure would have been catastrophic for the housing market and the economy.
That government backing worked and stabilized Fannie and Freddie. Today the two mortgage giants are producing billions of dollars in profits, and they have already sent some $146 billion back to the Treasury, with many projecting that they will have paid more in dividends than they originally borrowed as early as this coming spring. However, they are still operating under government supervision and will remain in conservatorship indefinitely if Congress doesn’t address housing finance reform. In addition, through government guarantees from Fannie, Freddie, and the FHA combined, the government is now backing as much as 90 percent of all new mortgages. That is up from 36 percent before the housing crisis erupted.
As a result, several housing finance reform proposals are being considered in Congress. One bill, the PATH Act, narrowly passed the House Financial Services Committee on a strictly partisan basis. Congresswoman Maloney opposes this bill because it would dissolve Fannie and Freddie, effectively taking the government out of the mortgage market. The PATH Act would replace Fannie and Freddie with a private National Mortgage Market Utility, and many believe it would increase mortgage rates and make the 30-year fixed-rate mortgage unattainable for most families.
In the Senate, the bi-partisan Corker-Warner bill would, like the PATH Act, wind down Fannie and Freddie, but it would create an explicit, limited government guarantee. It would create the Federal Mortgage Insurance Corporation, which would provide a full-faith-and-credit guarantee on eligible mortgage-backed securities, which would be paid for by guarantees fees assessed on the industry. The bill also makes explicit the need to ensure that credit unions and community banks have equal access to the secondary mortgage market.
The Senate Banking Committee Chairman, Tim Johnson of South Dakota, and the Committee’s Ranking Republican, Mike Crapo from Idaho, are conducting a series of bipartisan, in-depth hearings to explore the many issues surrounding housing finance reform. They have jointly announced their intent to introduce their own bipartisan bill at some as yet still uncertain date.
