02/06/2014 04:34 pm ET Updated Apr 08, 2014

Why Fix Something Not Broken?

Ever since the federal government took control of Fannie Mae and Freddie Mac, Congress has put several plans on the table to "fix" them -- with the exception of one: Let them operate the way they always have, only this time, regulate them properly and ensure they have sufficient capital reserves.

This is largely what Congress did to "fix" the nation's biggest banks that had much more to do with the subprime mortgage crisis than the government-sponsored enterprises, also known as GSEs.

The only difference between now and then is that now the private sector is doing nothing to help low-to-middle income people with good credit become homeowners, and the federal government has actually done things to harm this sector of the housing marketplace.

Young families, military families and low-income people who may not make six digits but have good credit are, for all practical purposes, blocked from owning a home by requirements for high credit scores and down-payments.

The New York Times recently wrote: "Yet despite the confluence of promising signs, little in the vast system that provides Americans with mortgages has returned to normal since the 2008 financial crisis, leaving a large swath of people virtually shut out of the market... a significant amount of borrowers with less-than-perfect credit scores remain largely shut out of the market."

Meanwhile, Wells Fargo's mortgage lending is down 60 percent from a year ago; JPMorgan's, down 55 percent. This makes no sense.

The National Community Reinvestment Coalition, a client of mine, has called on Congress to bring back common sense into the housing market by re-instituting the affordable housing goals that have been credited with providing homes -- both owned and rented -- to American households.

Contrary to some conservative commentary, having affordable housing goals does not mean anybody and everybody will be able to get a loan, repeating what occurred in the mid-2000s. It wasn't the goals or low-income housing advocates who put brokers into poor neighborhoods, knocking on doors for signatures on mortgage applications rarely reviewed before closing. It was pressure from Wall Street and the banks that drove demand for more and more abusive mortgages that came to be known as liar loans.

Fannie and Freddie are making money again, while operating exactly as they did before the housing bubble, only under government control. They've already paid back most of the $188 billion in bailout funds. Bank profits are almost back to where they were in 2006 and 2007 before the recession. Yet, despite growing demand for homes, the private sector has not stepped up its mortgage lending, resulting in Fannie and Freddie securitizing 68 percent of all single-family home loans today.

The Corker-Warner bill and others under consideration would reward the banking industry for not lending to creditworthy Americans by handing over the GSEs' mortgage securities business to banks. They not only get the business, they also get the government guarantee to boot.

Corker-Warren also assumes enough private capital exists to cover the $4.5 trillion in mortgage-backed securities currently guaranteed by Fannie and Freddie today. That's unlikely. Also unlikely is that the affordable housing trusts -- established in the bill to replace the goals -- will provide as much affordable housing as before.

No one disputes Fannie and Freddie's historic role in helping to create one of the strongest middle classes in the world. Few dispute the financial industry's role in helping to destroy it.

Unbelievably, Congress wants to give these banks a government guarantee on the loans they make -- essentially subsidizing their operations - while the nation's attorney generals and the U.S. Department of Justice bring and settle lawsuits for actions that occurred both before and after the housing debacle.

Why not go back to the way we did it before, only this time the regulators do their jobs by requiring Fannie and Freddie to take its public mission seriously -- keeping the housing market stable and providing affordable housing for low-to-moderate income families with good credit -- something that is not happening now.