National Mortgage News 6/01/16 – Civil Rights, Consumer Groups Urge FHFA to Recapitalize Fannie and Freddie

Civil Rights, Consumer Groups Urge FHFA to Recapitalize Fannie and Freddie

By Brian Collins

June 1, 2016

Several civil rights and community development groups wrote Tuesday to urge the Federal Housing Finance Agency to recapitalize Fannie Mae and Freddie Mac.

The joint letter included the Center for Responsible Lending, the National Community Reinvestment Coalition and Amalgamated Bank.

“Our organizations are deeply concerned that under the Preferred Stock Purchase Agreements with the Treasury Department, the capital buffers of Fannie Mae and Freddie Mac will be completely eliminated by the end of 2017,” said the letter to FHFA Director Mel Watt. “This course of action is likely to destabilize the housing economy, undermine efforts to make housing finance more accessible and affordable, and drive up the costs of homeownership.”

At the start of this year, the two government-sponsored enterprises had a capital buffer of $1.2 billion. This capital cushion will automatically be reduced to $600 million in 2017 and to zero by the end of 2018 under the Preferred Stock Purchase Agreements.

However, Freddie Mac reported a $200 million comprehensive loss for the first quarter, raising fears it could run through its capital cushion even faster.

Under the agreement, all the GSEs’ profits are swept into the U.S. Treasury.

As the conservator of Fannie and Freddie, FHFA has the authority to stop the quarterly dividend payments to the U.S. Treasury, according to the 10 groups that signed the letter.

“We urge you to suspend GSE dividend payments to Treasury, and require the GSEs to develop and implement capital restoration plans so they have enough capital to safely manage their business and to support America’s housing finance system,” the letter says.

The signers also included the Community Home Lenders Association, Community Mortgage Lenders of America, Corporation for Enterprise Development, The Leadership Conference on Civil and Human Rights, Leading Builders of America, NAACP and the National Action Network.

Separately, the Financial Services Roundtable is calling on the presidential candidates to spell out their plans for housing finance reform, including a plan to replace Fannie and Freddie and strengthen the U.S. housing finance system.

“The presidential candidates have an opportunity to better protect taxpayers and help consumers by making housing finance reform a top priority,” said John Dalton, the president of FSR’s Housing Policy Council.

 

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