Several of the largest civil rights groups in the country are joining together to call on the federal government to end the conservatorship of Fannie Mae and Freddie Mac and recapitalize the agencies, stating that an independent and fully capitalized Fannie Mae and Freddie Mac can better serve the country’s housing needs.
In a letter sent Thursday to President Barack Obama, as well as many other senior members of the federal government with housing ties, the National Community Reinvestment Coalition, the National Association for the Advancement of Colored People, and the League of United Latin American Citizens say they urge the Obama administration to reconsider its position on recapitalizing the government-sponsored enterprises.
Speaking at last week’s Mortgage Bankers Association’s Annual Convention and Expo in San Diego, California, Michael Stegman, senior policy advisor for housing for the White House, said that the administration is not in favor of recapitalizing Fannie and Freddie.
Stegman was adamant that there would be no recap and release of Fannie and Freddie.
“This administration does not support Fannie Mae or Freddie Mac exiting the conservatorship in the absence of comprehensive housing-finance reform,” Stegman said last week. “We continue to believe that comprehensive housing finance reform is the only way forward.”
In their letter, the NCRC, NAACP, and LULAC referenced Stegman’s statements, as well as those from Counselor to the Treasury Secretary Antonio Weiss, who recently wrote in op-ed in Bloomberg called “How Not to Fix Fannie and Freddie.”
In that piece, Weiss argued that the “recent push to recapitalize Fannie Mae and Freddie Mac and release them from conservatorship is misguided.”
The NCRC, NAACP, and LULAC write that the administration’s stated plan to reform the GSEs through legislative measures has no chance to succeed, given the current political climate, which has GSE reform measures “deadlocked” in Congress.
“With all of the political uncertainty, various piecemeal approaches to a new housing finance system and the future of the GSEs hanging in the balance, what we do not see or are unclear about is whether a government-sponsored and/or -supported secondary mortgage market will continue to subject financial institutions to affirmative obligations to serve traditionally underserved communities and all creditworthy borrowers,” the groups write in their letter.
“We firmly support Duties to Serve in the secondary market, as well as the primary market, and quite frankly, we are deeply concerned with what we see ahead,” the groups continue.
The letter was also sent to Vice President Joe Biden; Senior Advisor to the President Valerie Jarrett; Director of the National Economic Council Jeffrey Zients; Secretary of the Treasury Jacob Lew; Director of the Federal Housing Finance Agency Mel Watt; Chairman of the Senate Committee on Banking, Housing, and Urban Affairs Sen. Richard Shelby; Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs Sen. Sherrod Brown; Chairman of the House Committee on Financial Services Rep. Jeb Hensarling; and Ranking Member of the House Committee on Financial Services Rep. Maxine Waters.
The groups say they share the Obama administration’s desire to build on the revisions to the country’s housing finance system that were put in place after the financial crisis, but feel that there is no consensus in Congress around comprehensive housing finance reform, and worry about what happens when a new administration with unknown housing policies takes over the White House in 2017.
“Collectively, we have grown increasingly uneasy about the uncertainty that these political realities raise,” the groups write. “Given a seemingly interminable conservatorship, we are also concerned about: the outcome of several proposed policy riders pending in Congress; significant Federal Housing Finance Agency actions and other steps building towards a new housing finance infrastructure and practices; and the aggressive wind down of, among other areas, the Enterprises' paper-thin capital buffer.”
The groups say that the affordable housing goals and the products that Fannie Mae and Freddie Mac offer for underserved markets continue to play a “critical role” in housing finance, by affecting affordability and access to credit for low- and moderate-income and minority communities.
“While at this moment in time, we may disagree strategically with those in the administration who want to foreclose the possibility of recapitalizing Fannie Mae and Freddie Mac even as reforms continue, we fundamentally believe that you, Mr. President, are in the very best position to safeguard and protect homeownership for the working families and minority communities across the country who rely most on the Enterprises for access to mortgage credit,” the groups write.
“In the months that remain, we urge the administration to consider the critical role of the affordable housing goals, rethink its position and begin the recapitalization of the Enterprises, while also continuing to pursue the reforms that remain for Fannie Mae and Freddie Mac,” the groups conclude.
In a statement, NCRC CEO and President John Taylor said that the answer to fixing the housing market does not include doing away with Fannie and Freddie.
“They can and should be recapitalized; they can and should be fixed,” Taylor said.
"Fannie and Freddie, through their charters, their affordable housing goals and the products they offer, have played a critical role in creating homeownership opportunities and building the middle class in America, Taylor continued. “We simply cannot stand by and face losing their affirmative obligations to serve, especially when Congress does not have a viable, coherent plan that would better serve working families."