Published: April 2014

Proposed Freddie and Fannie reform needs work

Coalition: National Community Reinvestment Coalition (NCRC)

Significant changes are needed to improve and strengthen the proposed Johnson-Crapo housing finance reform legislation before it could provide the access to affordable credit guaranteed by Fannie Mae and Freddie Mac. If this bill became law in its current form, it would be a giant step backward for the working class, people of color, Millennials, and other traditionally under-served communities.

In an effort to prevent another housing crisis like the one that spurred the finacial crisis of 2008, Senate Banking Committee Chairman Tim Johnson and Ranking Member Mike Crapo drafted legislation to reform Freddie Mac and Fannie Mae.

“Housing finance reform remains the most significant piece of unfinished business from the 2008 financial crisis,” Crapo said. “Fannie Mae and Freddie Mac greatly contributed to the housing bubble, the financial crisis, and the dramatic government intervention that resulted. The current system is unsustainable, leaves taxpayers exposed to potentially trillions of dollars in liabilities, and has left the mortgage market in a state of limbo, forcing private capital out of the market.”

However, many are arguing that the proposed bill will not do enough to protect taxpayers and vulnerable communities.

Consumer Action joined over 300 coalition advocates in a letter to the Senate Banking Committee outlining their concerns with the access provisions in the Johnson-Crapo housing finance reform legislation. The proposed legislation has several problems when it comes to the issue of access to lending and affordable rental housing, and the coaliton recommended several changes be made in order to strenghten the bil, including:

- Eliminating the provision that allows banks using the government guarantee or securitization platform to opt-out of providing fair access to all creditworthy borrowers

- Giving the regulator robust enforcement tools in order to fully monitor and penalize, when necessary, any institution that uses the government guarantee or securitization platform for failing to provide broad access to credit

- Improve the quality and transparency of mortgage data by linking the National Mortgage Database and the Home Mortgage Disclosure Act database

As it currently stands, the Johnson-Crapo housing finance reform legislation fails to protect taxpayers and the vulnerable communities it seeks to provide fair access. We urge the Committee to include amendments that will strenghten the bill's role in reform.

More Information

Click here to read the full letter to the Senate Banking Committee.

For more information on housing finance reform, please visit NCRC's website.

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