To the extent that the public has heard of this small agency, it is primarily due to acting FHFA director Ed DeMarco’s controversial decision not to allow Fannie Mae and Freddie Mac to forgive principal balances for troubled homeowners, a policy we believe would have helped taxpayers, homeowners, communities, and the economy.
But the importance of the FHFA director’s role goes far beyond principal reduction. Here are four areas where a new director can make decisions that will support America’s families:
Support affordable rental housing. In recent years, renting has gotten markedly more expensive: Half of renters now pay more than 30 percent of their household income for housing, while 27 percent of renters pay more than half, both sharp increases over the past decade. Fannie and Freddie support rental housing in two ways: by providing financing for affordable multifamily properties and by providing funding for the National Housing Trust Fund, which was established in 2008 with bi-partisan support to create housing that is affordable for America’s very low- and low-income families. Currently, the FHFA is requiring Fannie and Freddie to scale back their multifamily support despite the program’s extremely strong performance during the financial crisis. A new director should keep these programs intact. As for the Trust Fund, the FHFA has refused to capitalize the fund, even in light of Fannie and Freddie’s record profits; this decision is not only unwise, but may also be illegal.
Serve all populations and geographies. The United States has a long history of unequal access to sustainable, affordable mortgages. Fannie and Freddie have a mission to provide safe mortgage credit in all communities and to all households, including low- and moderate-income ones. However, in recent years, the FHFA has stood in the way of this mission by watering down the affordable housing goals.The FHFA has also failed to implement the “Duty to Serve” rule, which was created in 2008 and would require Fannie and Freddie to make sure that underserved areas and housing types have adequate access to funding. A new director can advance this public mission rather than retreat from it.
Charge a fair price for mortgages. In recent years, the FHFA has doubled the fee that Fannie and Freddie charges borrowers whose loans they guarantee, and the agency recently announced that it plans to continue increasing the fee. These increases raise costs for borrowers without necessarily achieving the stated goal of bringing private capital into the system. A new director should act much more judiciously in changing the fees. The FHFA has also proposed charging more for mortgages to customers in states with long foreclosure timelines—a move that essentially punishes borrowers in states that protect homeowners during the foreclosure process.
Help nonprofits prevent unnecessary foreclosures. In neighborhoods hard-hit by foreclosures, certain nonprofit organizations have been helping homeowners and stabilizing communities by buying distressed loans, reducing the principal balance on the loan, and selling the home back to the original homeowners as long as they have the ability and will to pay. But in an effort to combat fraud, FHFA instituted a ban on these transactions. A narrow exemption to this policy would enable nonprofits to continue to save homes and stabilize neighborhoods.
As the Senate considers Rep. Watt to become the FHFA’s next director, it will be all too easy to focus solely on the principal reduction debate or to be distracted by lies about who caused the financial crisis. Instead, we must remember that what is really at stake is the future of our housing market and whether it will support America’s families and our broader economy. It’s time for an FHFA director who will use the agency’s power to accomplish these goals.
David Sanchez is a Research Assistant with the Housing Finance and Policy Team at the Center for American Progress Action Fund.