Federal Housing Finance Agency (FHFA) Director Mel Watt is scheduled to testify before the House Financial Services Committee on Tuesday in a hearing entitled "Sustainable Housing Finance: An Update from the Director of the Federal Housing Finance Agency."
In his testimony, Watt is expected to defend last month's decision to lift the suspension of the allocation of Fannie Mae and Freddie Mac funds into the Housing Trust Fund and the Capital Magnet Fund. The suspension was enacted in November 2008, two months after the government seized control of Fannie Mae and Freddie Mac – which required a combined $188 billion government bailout at the time to continue operations. They have since returned to profitability.
The decision to lift the suspension of the allocation of GSE funds to the housing groups was widely praised by progressives as a path for Americans to achieve homeownership.
"Affordable housing is about opportunity," HUD Secretary Julián Castro said when the decision was announced last month. "That’s why today represents important progress for the American people. The Federal Housing Finance Agency's decision to release resources for the Housing Trust Fund will help people across the nation secure a decent place to call home. This effort will assist individuals from all backgrounds—including low-income families and those experiencing homelessness—in building better lives."
However, the decision was just as widely criticized by members of the GOP, including HFS Committee Chairman Jeb Hensarling (R-Texas) and Representative Ed Royce (R-California), a senior member of the HFS Committee. Critics of the decision say it puts taxpayers at risk. Hensarling and Royce wrote a letter to Watt in April 2014 urging him to continue suspension of the allocation of the GSE funds to the housing groups.
"Contrary to what Fannie and Freddie apologists claim, the GSEs have yet to repay any of the taxpayer-funded bailout funds they received, which makes today’s announcement by the FHFA outrageous," Royce said. "Money coming in from the GSEs should go to the taxpayers instead of a slush fund for ideological housing groups to play around with."
Watt will also likely address such topics as the recent lowering of the FHA mortgage insurance premiums—another move that Hensarling and other Republicans have criticized—and Watt's proposed amending of the Federal Home Loan Bank membership rules.
The hearing is scheduled to begin at 10 a.m. Eastern Standard Time on Tuesday morning. This will be the second time that Watt, who has been FHFA director for exactly one year, has testified before Congress. He went before the Senate Committee on Banking, Housing, and Urban Affairs on November 19.