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Senate Explores Housing Finance Reform — Part VII

By    |   Tuesday, 12 November 2013 02:30 PM

The Senate Banking Committee, chaired by Tim Johnson, D-S.D., held a hearing on Nov. titled "Housing Finance Reform: Essential Elements to Provide Affordable Housing Options for Housing," another in the series of hearings on housing finance reform the Committee is holding throughout the fall.

At this hearing, witnesses made the case for a "duty to serve" requirement as a condition for the explicit federal guarantee of mortgage securities that the industry demands. This is the same condition that the American Bankers Association, (ABA), one of the most powerful lobbies in the industry, has testified is not needed, because the duty to serve all segments of communities is already provided under the Community Reinvestment Act.

In addition, witnesses representing consumers argued for the establishment of special funds to help meet the needs of underserved communities across the country, and they joined the industry in opposing a requirement that any specific down payment requirement, even as low as 5 percent, be mandated by the legislation.

Hilary Shelton, executive director of the National Association for the Advancement of Colored People, presented statistics documenting the fact that the bursting of the subprime mortgage bubble had a more severe impact on homeowners and communities of color than on the general population. In fact, $1 trillion of equity was lost by these communities, and they also suffered disproportionately from predatory lending. Therefore, he called for a specific mandate for all mortgage originators receiving a federal guarantee to serve all communities equally, and he opposed any requirement for a 5 percent minimum down payment.

Rick Judson, Chairman of the National Association of Home Builders, one of the leaders in the industry coalition backing the draft bipartisan bill S. 1217, made the standard industry pitch for a restructured mortgage finance system that would retain the 30-year, fixed-rate mortgage as the basic product and support the credit risk of mortgage-backed securities with an explicit government guarantee. He also opposed a specific 5 percent down payment requirement on the ground that this would restrict the universe of customers who could be served.

Sheila Crowley, CEO of the National Low Income Housing Coalition, is the leading supporter of the Affordable Housing Trust Fund (AHTF) that Fannie Mae and Freddie Mac had been required to maintain before they were placed under conservatorship, in order to close some of the gap between the supply and demand for affordable housing for low-income individuals and families. She praised the sponsors of the draft bill for including this provision, which is expected to produce about $2.5 billion to $5 billion annually, and she insisted that the Senate Banking Committee could provide the oversight needed to protect the interest of taxpayers.

Ethan Handelman, vice president of the National Housing Conference, is the principal supporter of the Magnet Fund, which is a revolving loan fund included in the bill that provides capital to support affordable housing programs. He advocated creation of another fund, the Market Access Fund, which is not likely to be included in the bill.

Douglas Holtz-Eakin, president of American Action Forum and a former head of the Congressional Budget Office, decried the creation of special funds that are not subject to the appropriations process or to oversight by the Appropriations Committee. He urged the senators who serve on that committee to help it "get its act together" so that it can provide the oversight the housing programs need.

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The Senate Banking Committee, chaired by Tim Johnson, D-S.D., held a hearing on Nov. titled "Housing Finance Reform: Essential Elements to Provide Affordable Housing Options for Housing."
Tuesday, 12 November 2013 02:30 PM
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