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The bill released by Sens. Tim Johnson and Mike Crapo would create a reinsurance fund to recoup losses on securities, establish a common securitization platform for the secondary mortgage market and open access to the secondary market for smaller lenders through a cooperative.
March 17 -
The Senate Banking Committee is moving forward with a plan to overhaul the housing finance system, but leaders still face a delicate balancing act in swaying some liberal members of the panel to sign on to the bipartisan effort without losing conservative supporters.
January 6 -
As Congress struggles to determine the appropriate role for government in the mortgage market, affordable housing may prove a politically charged hurdle on the path to reform.
August 7
WASHINGTON - A coalition of advocacy groups announced their opposition Friday to a bill by Senate Banking Committee leaders to overhaul the housing finance system, citing concerns about market access for low-income and minority families.
Sens. Tim Johnson, D-S.D., chairman of the banking panel, and Mike Crapo, R-Idaho, the ranking member, unveiled legislation last week that would unwind Fannie Mae and Freddie Mac and install a new housing system of mortgage securities backed with a government guarantee.
But housing advocates are warning that the bill could worsen ongoing inequality in the housing market, making it harder for lower income families to access credit to buy a house. The issue has been a long-simmering concern as the debate over housing finance reform gained momentum over the past year, and could prove a stumbling block for the legislation if liberal Democrats on the committee, including Sens. Elizabeth Warren of Massachusetts, Jeff Merkley of Oregon and Sherrod Brown of Ohio, subsequently refuse to sign onto the plan over it.
"The new Senate proposal to reform the housing finance system would needlessly make mortgages more expensive and less available," the groups said in a joint press release. "The goal of housing finance reform is to create a safe housing finance system that provides affordable mortgages to all creditworthy borrowers, including people of color and families with modest incomes and lower wealth."
Advocates said they have "serious concerns" that the legislation as written fails to meet that goal, though they added that they "look forward to working with the co-sponsors to improve the bill."
The Leadership Conference on Civil and Human Rights, National Association for the Advancement of Colored People, National Coalition for Asian Pacific American Community Development, National Council of La Raza, National Fair Housing Alliance, National Urban League, and Center for Responsible Lending signed on to the release.
The Johnson-Crapo bill calls for the end of affordable housing goals that existed under the government-sponsored enterprises, instead putting into place plans to capitalize several affordable housing trust funds and provide incentives to lenders to provide credit to underserved communities.
It also sets underwriting standards for any mortgages to be wrapped into a government-backed security. The mortgages must follow parameters set by the Consumer Financial Protection Bureau's qualified mortgage rule and include a downpayment of 3.5% for first-time homebuyers and 5% for everyone else.
But housing advocates argued that the bill doesn't go far enough.
"The bill lacks provisions to ensure that the housing finance system is fair and non-discriminatory," they said in the release. "Moreover, the changes proposed in the reform bill may disadvantage smaller and rural lenders that serve already under-serviced portions of the population."
