U.S. Senator Bob Mendendez (D-New Jersey) has written a letter to FHFA Director Mel Watt seeking answers regarding Freddie Mac’s failure to meet two lending goals for low-income buyers in 2014.
Menendez, Ranking Member of the Senate Subcommittee on Housing, Transportation, and Community Development, cited preliminary findings in the FHFA’s annual housing report. The Senator noted that Freddie Mac had failed to meet its single-family low- and very low-income home purchase goals last year and asked Watt what the agency is going to do to make corrections in these two areas.
“This means that fewer low-income households were able to secure homeownership opportunities in 2014,” Menendez said. “At a time when access to mortgage credit remains tight, particularly for those low-income and minority households, it is more important than ever that the GSEs meet the affordable housing goals.”
The national homeownership rate has been on the decline since peaking at 69 percent in 2004; during the summer of 2015, it dropped to its lowest level in nearly 50 years, 62.4 percent. It recently increased—for the first time in two years—up to 64.5 percent, although that is still the lowest homeowership rate in the country since 1994.
“Homeownership is a critical tool for lower income and minority families to build wealth [and] for many…, their home is their singular source of equity,” Menendez said. “In communities where lending and access to credit is inadequate, many families rely on the equity in their homes to start a small business, to pay for a child’s higher education, or to finance the care of an elderly parent. Affordable housing goals continue to play a crucial role in facilitating access to credit for underserved markets, and I urge you to hold the GSEs accountable for any failures to meet such goals.”
“Affordable housing goals continue to play a crucial role in facilitating access to credit for underserved markets, and I urge you to hold the GSEs accountable for any failures to meet such goals.”
Senator Bob Menendez
The above table shows Freddie Mac's Single-Family Housing Goals and Performance Results for 2014. For each housing goal, the percentage shown reflects the proportion of mortgages that met the criteria for that goal. The proportion of Freddie Mac's mortgages that met the low-income purchase goal and very low-income purchase goal fell short of both the benchmark and market levels for 2014.
Menendez asked Watt to “provide detailed responses” to the following three questions in the letter:
- What factors, circumstances, or policy decisions led to Freddie Mac falling short of its affordable housing goals in 2014?
- Should FHFA make a final determination that Freddie Mac failed to meet its affordable housing goals for 2014, what remedial actions will FHFA take to address the deficiency?
- Should FHFA make a final determination that Freddie Mac failed to meet its affordable housing goals for 2014, what steps will the agency take to ensure that Freddie Mac complies with affordable housing goals in the future?
When contacted by DS News, an FHFA spokesperson acknowledged that the Agency has received Menendez’s letter and said the Agency plans to issue a response. In a letter regarding the preliminary determination of Freddie Mac's housing goals performance for 2014 from Watt to Freddie Mac CEO Donald Layton, Watt said that "Under the Safety and Soundness Act, Freddie Mac has 30 days to submit any documentation it wishes FHFA to consider in making a final determination about Freddie Mac's compliance with the housing goals for 2014."
Click here to read the entire text of Menendez’s letter.
Click here to see FHFA’s report.