Nearly a decade ago, U.S. Rep. Maxine Waters called for less regulation of Fannie Mae and Freddie Mac. Today, the California Democrat is talking about replacing a Republican proposal to wind down the government-controlled enterprises with her own.
In 2004, former Office of Federal Housing Enterprise Oversight director Armando Falcon testified before Congress. OFHEO was a nearly powerless government agency that regulated the pair of secondary lenders.
At the hearing, Waters complained about the concerns over the government-sponsored enterprises. She questioned the need for nearly a dozen hearings on the matter when nothing was broken.
“Mr. chairman, we do not have a crisis at Freddie Mac, and in particular, at Fannie Mae, under the outstanding leadership of Mr. Frank Raines,” Waters said at the hearing. “Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals.”
Waters instead suggested that the focus should be shifted from the GSEs to the regulator so that Fannie’s and Freddie’s affordable housing mission wasn’t impeded.
“A mission that has seen innovation flourish from desktop underwriting to 100 percent loans,” she said.
Nearly 10 years later, OFHEO has been replaced by a much more powerful Federal Housing Finance Agency, and Fannie and Freddie collapsed under the weight of the financial crisis in 2008.
So far, Fannie and Freddie have required $187 billion in government assistance — though $125 billion in dividends has so far been earned by the Treasury Department — and the Obama administration has vowed to shutter the two entities.
In June, the Housing Finance Reform and Taxpayer Protection Act of 2013, was introduced in the Senate, while GSE legislation was also introduced in the House.
But Waters isn’t happy with the Republican-sponsored legislation in the House, which she calls “radical” and “not viable,” according to a transcript of her speech at the National Association of Federal Credit Unions’ 2013 Annual Conference. She spoke on Tuesday.
She opposes the House bill because it eliminates 30-year mortgages and hurts credit unions by creating a secondary market dominated by megabanks. She’s also concerned about that it “severely undercuts the FHA” and would make government mortgage insurance an “administrative nightmare.”
Additional concerns include the abolition of the Housing Trust Fund, the elimination of the GSEs’ role in multifamily housing, and the cementing of the government’s implicit guarantee instead of shifting such expense to the market.
“Frankly, given that the Republican bill undercuts both homeownership and rental markets, I’m not sure where my Republican colleagues expect your members to live,” she said.
Waters said that she has been working on an alternative approach that is consistent with principles established by House Committee Democrats.
“I hope to improve upon the bipartisan proposals being discussed by, for example, ensuring that your institutions have direct access to the secondary mortgage markets,” Waters told credit union executives. “Once released, I strongly encourage you to share your comments about this forthcoming approach so that the debate is an informed one.”
