FHFA Director Mel Watt Urges Congress to Pass Meaningful Housing Finance Reform

Speaking at the Bipartisan Policy Center on February 18, Federal Housing Finance Agency Director Mel Watt again urged Congress to pass meaningful housing finance reform to end the uncertainty surrounding the secondary market mortgage giants, Fannie Mae and Freddie Mac. 

Mr. Watt cautioned that an indefinite government conservatorship of Fannie Mae and Freddie Mac would undermine the financial stability of the two companies as well as the overall confidence in the U.S. housing market. Mr. Watt stated, “I continue to hope that Congress can engage in the work of thoughtful housing finance reform before we reach a crisis of investor confidence or a crisis of any other kind.” Under the terms of conservatorship, the enterprises cannot build on their capital reserves, which are estimated to run out by 2018. When that happens, if either company sustains a loss, they will again have to rely on U.S. taxpayers by taking a draw from the Treasury Department. “Future draws could lead to a legislative response adopted in haste or without the kind of forethought it should be given,” Mr. Watt stated.

Mr. Watt has said that if Fannie or Freddie had to make another draw from Treasury, their obligation to fund the National Housing Trust Fund (NHTF) and the Capital Magnet Fund could be suspended again.

NLIHC supports housing finance reform, such as was passed by the Senate Banking Committee in 2014, which would replace Fannie and Freddie with a Federal Mortgage Insurance Corporation (FMIC).  S. 1217 would have assessed a 10 basis point fee on all transactions, generating an estimated $5 billion a year, three quarters of which would go to the NHTF (see Memo, 5/16/2014).

Watch the archived webcast here: http://bipartisanpolicy.org/events/address-by-fhfa-director-mel-watt/