Posted on Wednesday, March 16, 2011
While Fannie Mae and Freddie Mac need serious reform, we must get these reforms right. Among the Administration’s several proposals, only one—the one that maintains a limited role for the GSEs—even has potential for ensuring all families have access to home loans and achieving stability in the housing market.
Completely throwing out a mortgage finance system that worked well for decades carries enormous risks, including these:
• Loss of family wealth and less economic security. The American Dream of homeownership is alive and well, but a plan to end reliable funding of mortgages means that fewer creditworthy working families would have access to mortgage credit.
• Lending inequities that destabilize the market. The Administration’s plan would do little to correct inequities that created an opening for predatory lenders. Moreover, the plan does nothing to strengthen enforcement of fair lending and anti-discrimination laws.
• A less competitive market. Banks of all sizes, not just the largest, need equal access to lending capital—which in turn would be better for small businesses and job creation.
The best option offered by the Administration allows for some government backing of mortgages, but with tighter limits on the loans supported and stronger protections against mortgage defaults. We also support the recommendations for reforming mortgage servicing practices. However, CRL has significant concerns about other elements in the proposal, most notably the arbitrary 10 percent down payment requirement.
The status quo is not an option. We support substantial changes that would result in affordable mortgages for all qualified borrowers, a streamlined role for government, and a strong housing market that creates homeownership and jobs. We cannot support a plan that leaves the economy and taxpayers at risk.
CENTER FOR RESPONSIBLE LENDING