On or before January 31, the U.S. Department of the Treasury is expected to release its report on ways to end the conservatorship of Freddie Mac and Fannie Mae and reform the secondary mortgage market. The release of the report is the kick-off event of the debate on the future of these government sponsored enterprises.
The National Housing Trust Fund campaign will focus on assuring that funding for the National Housing Trust Fund (NHTF) is included in whatever reform emerges as the consensus position.
When the NHTF was created in 2008, it was expected that revenue generated by Freddie and Fannie would provide the initial source of funding. These contributions were suspended when the enterprises were placed in conservatorship in fall 2008. Since that time, the federal government essentially has run both companies and provided hundreds of billions of dollars to support their operations during the conservatorship.
In last year’s Dodd-Frank Wall Street Reform bill, Congress acted to provide greater protections for taxpayers and the overall financial system. However, it deferred action on Freddie and Fannie, requesting that the Treasury Department recommend ways to end the conservatorship. Among other items, the report is to analyze the federal government’s role in housing finance, the structure of housing finance to support the availability of 30-year fixed rate mortgages, and the impact of reforms on the rental market. Advocates have emphasized with Treasury the need to maintain NHTF funding as the system is reformed.
Anticipating the need for reform legislation, Treasury and HUD asked a series of questions about the future of the housing finance system, to which NLIHC responded and stressed the need for NHTF funding (see Memo, 7/23/10). NLIHC President Sheila Crowley also testified before the House Committee on Financial Services that support for housing that would not be financed by the market was an essential element of reform legislation (see Memo, 4/16/10).
With the change in the majority party in the House, Representative Spencer Bachus (R-AL), the new chair of the House Committee on Financial Services, will be key in determining what the House will do with GSE reform. Chairman Bachus has announced a series of principles to guide the debate. They include reestablishing a housing finance market with private capital as the primary source of mortgage financing; restoring stability and liquidity to the housing finance system in a way that protects against future market disruptions; encouraging innovation and diversity in housing finance and expanding consumer choice; and requiring Fannie and Freddie to repay taxpayers. The principles do not mention the NHTF. Advocates will work with Mr. Bachus and other committee members to ensure that any legislation under consideration provides funding for it.