Former Fannie Mae exec: Mel Watt needs to take charge of GSE reform
Offers own 5-point plan for housing finance reform
For the second time in less than a week, we’re about to hear from Mel Watt. Watt is now officially the director of the Federal Housing Finance Agency, and he’s set to speak on Tuesday morning at the Brookings Institution at an event called “The Future of Fannie Mae and Freddie Mac.”
Up to this point, Watt has not spoken publicly about his plans for the GSEs. And with Congress seemingly unable to reach a consensus about what to do about Fannie Mae and Freddie Mac, Watt is in a crucial position to help shape the future of housing in this country.
Over the last few months, some have expressed concern over his silence but it’s possible that Watt’s silence will come to an end on Tuesday.
On the eve of Watt’s first opportunity to speak about GSE reform, a former Fannie executive is calling on Watt to use his authority as FHFA director to improve access to housing immediately.
“The odds of housing finance reform legislation making it to the President’s desk this year seems doubtful, so the list of priorities Mr. Watt will outline on Tuesday, May 13th, at the Brookings Institution will likely represent the most meaningful housing reform actions to occur this year,” said Jim Carr, the former senior vice president for financial innovation, planning and research for the Fannie Mae Foundation.
Carr, who also served as vice president for housing research for Fannie Mae, is currently a senior fellow with the Center for American Progress and a distinguished scholar with The Opportunity Agenda.
“The FHFA’s authority over Fannie Mae and Freddie Mac enables Director Watt to implement comprehensive housing finance reforms immediately - reforms that will make housing access the cornerstone of economic recovery and enable the middle class to become stable once again,” Carr said.
Carr said that there are several barriers that are limiting access to homeownership right now.
- Conventional mortgage lending is now all but closed to people of color, low-and moderate-income households, and first-time homebuyers. The homeownership rate for young adults has fallen from nearly 50% to 42% and mortgage lending to African Americans and Latinos has dropped by over 70% since the housing market collapsed.
- Lack of access to affordable home loans undermines asset-building opportunities for American families and contributes to an ongoing drag on the U.S. economy. It also denies households of color to regain their wealth lost during the Great Recession estimated to amount to 53% and 66% for African Americans and Latinos, respectively.
- Five million American families cannot find affordable rental housing, which destabilizes household finances, leads families into homelessness, and makes planning for future needs — especially for education and jobs — far more difficult.
Count Carr among those who do not want to see Fannie and Freddie wound down, which would happen if Johnson-Crapo (or any of the other current GSE reform proposals) passes in Congress.
“Major legislative proposals to revamp the housing finance system — notably the Johnson-Crapo bill — would eliminate Fannie Mae and Freddie Mac and further restrict access to mortgage lending, rather than making homeownership more accessible,” Carr said. “This is a grave misstep; Fannie and Freddie have served Americans well and their elimination will shift more decision-making about lending and policy to the banks that created the housing bubble.”
Carr also offers up his own five-point plan for improving access to affordable homeownership:
1. Increase access to safe, affordable, and sustainable home loans. This will help stabilize local economies by rebuilding wealth for lower-income families and first-time borrowers.
2. Enforce fair housing and equal credit opportunity law to ensure access for people and communities of color.
3. Begin contributions to the National Housing Trust and Magnet Funds, which were established in the Housing and Economic Recovery Act of 2008 with the intent to help low-income families find affordable rental housing.
4. Improve mortgage servicing standards, specifically prioritize foreclosure prevention practices including the use of principal adjustment, and prioritize the sale of distressed and foreclosed properties to promote homeownership.
5. Continue to support or expand the financing of multifamily housing in order to improve access to affordable rental units for low- and moderate-income families.
In less than 24 hours, we'll know if Mel Watt has his own five-point plan, ten-point plan, or zero-point plan. No matter what, keep it tuned to HousingWire for coverage of Mel Watt's big speech. It should be interesting.