In response to some recent announcements by key government officials to the effect that the FHFA’s conservatorships of Fannie Mae and Freddie Mac will continue for the final 15 months of the Obama Administration, several civil rights groups are calling on the Administration to recapitalize and reform the GSEs.
The National Community Reinvestment Coalition (NCRC), the National Association for the Advancement of Colored People (NAACP), and the League of United Latin American Citizens (LULAC) sent a letter to President Obama, calling on the Administration to end the conservatorships and recapitalize Fannie Mae and Freddie Mac. The letter came in response to last week’s remarks by Treasury Secretary Jack Lew and Counselor to the Treasury Secretary Antonio Weiss stating that the GSEs would not recapitalize and would remain in conservatorship during the final year of the Administration.
“The most sensible path forward for the housing finance system is to recapitalize Fannie and Freddie, take them out of conservatorship, and to build on the reforms of strong supervision and oversight of the Enterprises started in 2008 with the passage of the Housing and Economic Recovery Act,” NCRC President and CEO John Taylor said. “We agree with the Administration that there are a number of reforms still needed in the secondary mortgage market, but the answer does not lie in scrapping Fannie Mae and Freddie Mac. They can and should be recapitalized; they can and should be fixed.”
“We anticipate several others in the housing advocacy and lender community will also be expressing similar thoughts about recapitalization and the future of Fannie Mae and Freddie Mac in the coming days.”—NCRC President and CEO John Taylor
The GSEs have been in conservatorship of the FHFA since September 2008, when they received a $187.5 billion taxpayer bailout to continue operations. The fact that they remain in conservatorship seven years later remains a contentious topic among lawmakers and those in the housing industry. While the HERA made it clear from the beginning that the conservatorships were intended to be temporary, Fannie Mae and Freddie Mac remain in the FHFA’s control seven years later with no end in sight—meaning taxpayers would be on the hook if the GSEs were to need another bailout. Weiss, in his editorial last week, said said the opposite was true—that a "recap and release" (recapitalize and release the GSEs from conservatorship) could potentially result in another taxpayer-funded bailout.
Legislation has been introduced to try and end the conservatorships and privatize Fannie Mae and Freddie Mac, notably by Senator Bob Corker (R-Tennessee), but it has not made any headway.
“Fannie and Freddie, through their charters, their affordable housing goals and the products they offer, have played a critical role in creating homeownership opportunities and building the middle class in America,” Taylor said. “We simply cannot stand by and face losing their affirmative obligations to serve, especially when Congress does not have a viable, coherent plan that would better serve working families. We anticipate several others in the housing advocacy and lender community will also be expressing similar thoughts about recapitalization and the future of Fannie Mae and Freddie Mac in the coming days.”
Click here to read the letter.