Long Island City, Queens – November 15, 2013 – (RealEstateRama) — Congresswoman Carolyn Maloney (NY-12), Ranking Member of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, hosted a roundtable today at the United Nations Federal Credit Union in Long Island City to discuss proposed reforms to federal housing and mortgage finance laws with members of Queens’ real estate and mortgage industries, as well as housing experts.
“Housing is a cornerstone of our economy and a major industry here in Queens. And right now, Washington, DC is debating major reforms to our country’s housing finance policies, including the future of Fannie Mae and Freddie Mac, which could have a significant impact on our local community’s real estate market. Congress can’t make these changes in a vacuum. That’s why I convened today’s roundtable to hear directly from housing experts in our community about how these reforms could affect Queens,” said Congresswoman Carolyn Maloney.
“As the Ranking Member of the subcommittee that oversees Fannie Mae and Freddie Mac, 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 in Queens today,” said Congresswoman Maloney.
Today’s housing roundtable in Queens was the second of two that Congresswoman Maloney convened – the other was held in Brooklyn. The events gave stakeholders in the local mortgage and real estate industries, as well as housing experts, a chance to offer suggestions on how to reform Fannie and Freddie.
The panelists who participated in today’s roundtable in Queens, expressed the following concerns with some of the pending housing finance reform legislation:
“Our concern is with affordable housing and affordable senior housing, in particular. Affordable housing depends on a guarantor for the development loans. The guarantor of choice has been Fannie Mae. The state has on occasion been the guarantor, but will is have the capacity to carry the full load with Fannie Mae? That is the question,” said John Kaiteris, Executive Director and CEO of HANAC.
“As a cooperative financial institution with more than half of our mortgage lending portfolio comprised of 30-year fixed mortgages, we believe that the right path towards housing stabilization is the continued presence of at least one entity that has an explicit government guarantee,” said John Lewis, Senior Vice President, Corporate Affairs & General Counsel, of USD 3.9 billion, Long Island City-based United Nations Federal Credit Union, which makes mortgage loans available to the active and retired UN/agency staff and their families across the United States and throughout New York’s five boroughs. “Only with a truly competitive marketplace can members of credit unions large and small find affordable, reliable and accessible options and the Path Act would threaten a functioning and sustainable environment.”
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.
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.