The sharply divided Senate Banking Committee vote on the Johnson-Crapo housing finance reform measure should serve as a clear signal that it is time for Congress to go back to the drawing board on plans for our system of housing finance. The Johnson-Crapo bill has serious problems for working Americans. If the bill in its current form became law, it would do enormous harm to homeownership opportunity. The bill must not be given a floor vote in the Senate.
There has been an ill-advised and misplaced push to get rid of Fannie Mae and Freddie Mac. Doing so would be a mistake. Fannie Mae and Freddie Mac have affordable housing goals, which help to make sure that the market serves underserved communities, and which have had a tremendous positive impact. The Johnson-Crapo bill eliminates the affordable housing goals and does not do enough to ensure that all creditworthy borrowers are able to access conventional mortgage credit. Among the bill's problems: it would create a system where the regulator does not have meaningful authority to require institutions to serve all communities fairly. That is just one of several serious issues with the bill.
The bottom line is that less conventional lending to creditworthy families means fewer homeowners, which hurts communities and the economy at large. Therefore, making sure that responsible credit is made available to all creditworthy borrowers is in our national interest. It's also essential to the future of the middle class in America. Homeownership is the single most effective way for working-class people to build wealth and enter the middle class.
So, fixing and preserving Fannie Mae and Freddie Mac may be the best hope for the American middle class. Fannie Mae and Freddie Mac need to be regulated properly, they need to be required to maintain sufficient capital reserves, and they need to be operated transparently. But given the current legislation, eliminating them would be reckless and foolish. Fannie and Freddie have played a very important role in helping to grow the American middle class, and can continue to play that role.
Federal Housing Finance Agency Director Mel Watt's recent remarks on Fannie Mae and Freddie Mac at the Brookings Institution signal a renewed emphasis on making sure conventional mortgage credit is available to creditworthy borrowers, which is a very positive development. There is still more he can do to help, including restoring the affordable housing goals to full force, funding the National Housing Trust Fund, and allowing principal reductions at Fannie and Freddie.
Thankfully, opposition to the highly problematic Johnson-Crapo bill has mounted. Last month, the National Community Reinvestment Coalition and over 300 community organizations from across the country sent a letter to the Senate Banking Committee, highlighting the serious problems with the bill. And the 13-9 vote on the bill in the Senate Banking Committee shows that several senators on the committee have rightfully stood strong and said no to a bill that isn't right for communities and working people. Hopefully, the conversation can now turn to the sensible thing to do: putting the affordable housing goals back in action, fixing Fannie Mae and Freddie Mac, and taking them out of conservatorship.
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