Leading Civil Rights Advocates Urge Obama To “Recap And Release,” While Stegman Stands Firm by Amanda Maher
It’s becoming increasingly clear that housing finance reform isn’t going to happen any time soon. With the U.S. Treasury sweeping all of the Fannie Mae and Freddie Mac profits, investors are growing inpatient. With FHFA making piecemeal, and often unilateral, changes, housing advocates are growing inpatient.
Last week, Obama advisor Michael Stegman told a group of mortgage bankers that the administration plans to keep GSEs under government conservatorship instead of releasing and recapitalizing as investors and housing advocates alike have urged.
“The Obama administration wants to transition to a better system, one that provides broad access to housing supported by a sound and robust mortgage market, without exposing taxpayers to another rescue,” wrote Antonio Wise, advisor to Treasury Secretary Jacob Lew, at the time.
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In response, the National Community Reinvestment Coalition (NCRC), National Association for the Advancement of Colored People (NAACP) and the League of United Latin American Citizens (LULAC) wrote a letter to President Obama on Thursday expressing their deep concern for the lack of reform to date, and urging, instead, for the “recap and release” of Fannie Mae and Freddie Mac.
“We all recognize that important issues remain with regard to their corporate governance structure, the federal guarantee and the size of returns at the Enterprises,” the letter stated. “However, we also see certain political realities in front of us: there is no consensus in Congress around comprehensive housing reform, and a new Administration with unknown housing policies is on the horizon.”
They continued: “Collectively, we have grown increasingly uneasy about the uncertainty that these political realities raise.”
Given these political realities, the group urged President Obama to reconsider the Administration’s positon on recap and release of the Enterprises—Enterprises that provide critical access to mortgage credit for working families and minority communities.
NCRC President and CEO John Taylor reiterated that these civil rights’ advocates do not agree with those who believe Fannie Mae and Freddie Mac should be dismembered altogether. Instead, “the most sensible path forward for the housing finance system is to recapitalize Fannie Mae and Freddie Mac , take them out of conservatorship, and to build on the reforms of strong supervision and oversight of the Enterprises started in 2008.”
Taylor did, however, lash out at Congress by pinpointing blame on legislators for not having established a clearer, more coherent plan for GSE reform.
Fannie Mae and Freddie Mac have been in FHFA conservatorship since September 2008, after receiving a taxpayer bailout to the tune of $187.5 billion, which has since been more than repaid. Under HERA, the Housing and Economic Recovery Act that initiated conservatorship, government control was intended only to be temporary. Seven years later, little progress has been made toward housing reform and there’s no obvious pathway forward. What that means, which advocates rightly fear, is that taxpayers would shoulder the cost if the GSEs were to need yet another bailout down the road.
Appearing dissuaded, Stegman reiterated Thursday afternoon that the Administration will not bend to “the increasingly noisy advocates of GSE release.” He states the release while the GSEs flawed charters were still intact would do taxpayers a disservice; instead, “We should pursue more comprehensive approaches to reform such as those that members of Congress have introduced over the past two years…or build on bipartisan agreements,” Stegman said.
The problem remains, however, that though Congress continues to introduce reform measures, all such measures remain gridlocked by legislators who are all but counting down the days before a new administration comes to the helm. And as the civil rights advocates noted, it’s anyone’s guess what the priorities of a new administration will be; it could be years before meaningful reform happens. In the meantime, taxpayers and investors are forced to stand by idly as FHFA chips away at changes that – absent of broader reform – continue to have little impact.