File: 
NCSHA Housing Finance Reform Letter to Chairman and Ranking Member.pdf

Summary

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    National Council of State Housing Agencies
    April 4, 2011

    The Honorable Scott Garrett
    Chairman
    Capital Markets and Government Sponsored Enterprises Subcommittee
    U.S. House of Representatives
    2244 Rayburn House Office Building
    Washington, DC 20515

    The Honorable Maxine Waters
    Ranking Member
    Capital Markets and Government Sponsored Enterprises Subcommittee
    U.S. House of Representatives
    2344 Rayburn House Office Building
    Washington, DC 20515

    Dear Mr. Chairman and Ranking Member Waters:

    On behalf of the housing finance agencies (HFAs) of the 50 states, New York City, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, the National Council of State Housing Agencies (NCSHA) urges you to consider the collective impact on affordable lending in this country of the housing finance reform steps the Subcommittee is preparing to take, those the Administration has recently proposed, and those Congress and the Administration have already secured. We are deeply concerned that, taken together, these actions will deny worthy first-time homebuyers and rental housing developments access to affordable mortgages. We also believe these steps far exceed those necessary to protect consumers, reduce risk, and increase private sector involvement within our housing finance system.

    Together, the bills before the Subcommittee would effectively eliminate any obligation on the part of Fannie Mae or Freddie Mac to finance affordable housing by abolishing their affordable housing goals and duty to serve mandates. The bills’ proposed pricing increases, portfolio reduction requirements, and prohibition on new activities would further limit the GSEs’ ability to service the affordable housing market.

    At the same time, the Administration has proposed as part of its GSE transition plan a minimum 10 percent down payment requirement on GSE mortgages, to which Freddie Mac has already responded by increasing its requirement from 3 to 5 percent. The Administration also recommended that FHA increase its pricing, which it has done, and we understand FHA is also considering an increase in its minimum down payment requirement to 5 percent.

    Meanwhile, federal banking regulators are likely to define a qualified mortgage pursuant to the Dodd-Frank Act in a way that leads to further tightening of lending requirements, when mortgage credit is already severely constrained. All of this is being done without any meaningful steps by Congress or the Administration to ensure the continued availability of affordable housing financing.

    As we testified before the full Committee last year on GSE reform, affordable housing lending caused neither the financial demise of the GSEs nor the collapse of the housing market. Bad lending did. Yet, affordable lending seems to be the target and will most certainly be a casualty of many of these so-called reform efforts.

    NCSHA once again urges Committee members to look to the multi-decade record of safe and sound lending success that the HFAs have established for evidence that affordable housing lending done right—in a responsible, sustainable way—is not the problem. In fact, it is the reason that millions of everyday, hardworking people—public servants, small business owners, nurses, teachers, and firefighters—the backbone of America—today have homes they can afford.

    Please do not eliminate what is working in an overreaction to what did not. Do not add to the suffering the recent Great Recession has imposed on lower- and middle-income Americans by now making it virtually impossible for them to secure affordable, sustainable homes.

    NCSHA’s position paper on GSE reform, which we have previously supplied the Committee, is attached for your reference. We stand ready to assist the Committee in any way we can.

    Sincerely,
    Barbara Thompson
    Executive Director