FHFA Director Mel Watt is scheduled to speak on the future of Fannie Mae and Freddie Mac today at the Brookings Institution. Jim Carr, a senior fellow at the Center for American Progress and distinguished scholar at The Opportunity Agenda, said yesterday in a statement that Watt should use his authority to help troubled borrowers.
“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,” Carr said. “As Americans across the nation know, the housing crisis isn’t over. Mortgage loan originations are at a 17-year low as millions of qualified borrowers are locked out of the conventional loan market. Most negatively impacted are young adults, moderate-income families, and people of color. Moreover, although foreclosures have fallen dramatically since the depths of the crisis, millions of households remain underwater with their mortgages. Yet rather than being able to access principal reduction, the FHFA continues to deny this option to struggling owners.
“Further, contributions for the National Housing Trust and Magnet Funds continue to be withheld, despite the fact that the U.S. is facing its worst affordable housing shortage in decades,” Carr added. “Payments to the National Housing Trust and Magnet Funds are required by law and should begin given some of Fannie Mae and Freddie Mac’s impressive earnings, especially considering that both Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have paid the government more than the amount they received in bailout funds.
“FHFA Director Watt should use his authority to institute policy changes that will help improve access to affordable rental housing and homeownership immediately. His leadership can help rebuild communities devastated by massive foreclosures and assist families by helping them access safe, affordable and sustainable conventional mortgage credit.”
Carr, a former vice president for housing research at Fannie Mae, also called the currently stalled Senate plan to eliminate Fannie and Fredde “a grave misstep.”
“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,” he said. “However, 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 that 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.”
The director of the Federal Housing Finance Agency must take charge of mortgage reform since Congress is unwilling to tackle the problem, says a former Fannie Mae executive.