The U.S. House of Representatives’ Financial Services Committee (HFSC) held a hearing, “Housing in America: Oversight of the Federal Housing Finance Agency,” on July 20. Sandra Thompson, director of the Federal Housing Finance Agency (FHFA), served as the hearing’s sole witness. The FHFA is charged with regulating and providing oversight of Fannie Mae and Freddie Mac (“the Enterprises”) and the Federal Home Loan Banks.
Committee members questioned Director Thompson on FHFA’s pandemic response, transparency goals, contributions to housing affordability, and the safety and soundness of its regulated entities. Committee Chair Maxine Waters (D-CA) praised FHFA and Director Thompson for the “historic effort to require [Fannie Mae and Freddie Mac] to develop and implement equitable housing finance plans to address the gross racial inequities in their books of business, and to ensure that they prioritize innovative equitable practices that benefit everyone.”
Director Thompson explained that “FHFA has a vital role in both protecting the safety and soundness of the housing finance system and promoting access to mortgage credit nationwide through the supervision of our regulated entities – Fannie Mae, Freddie Mac…and the Federal Home Loan Bank System.” FHFA’s mission includes providing liquidity for housing throughout the nation, including in underserved markets such as rural and tribal areas, as well as for manufactured housing and for the preservation of affordable housing.
According to Director Thompson, FHFA’s actions during the pandemic kept millions in their homes. “We took decisive action to support the market and provide relief to borrowers and renters with mortgages backed by the Enterprises,” she said. “We worked to ensure borrowers could temporarily suspend their mortgage payments if needed while developing programs for them to get back on track through the Enterprises’ existing mortgage modification options.”
Today, housing price growth is at a historical high, fueled in part by a low supply of homes for sale and rapidly increasing mortgage interest rates. While FHFA does not have a direct effect on housing supply, Director Thompson explained that “FHFA is taking incremental steps to help increase the supply of multifamily rental housing by raising the Enterprises’ Low Income Housing Tax Credit (LIHTC) investment allocations, which is an important source of funding for new affordable rental housing.” LIHTC is the primary source of financing for the construction and preservation of affordable housing. NLIHC supports expanding the LIHTC with reforms to better target program resources to serve households with the lowest incomes.
In some cities, population growth has put a greater strain on the affordable housing market. Representative Joyce Beatty (D-OH) cited NLIHC’s recent report, The Gap: A Shortage of Affordable Rental Homes, stating that “for [Columbus, Ohio], there are only 32 available affordable housing units for every 100 households. That leaves us basically about 50,000 units short.” Representative Beatty also asked about the potential impact of increasing the Enterprises’ contributions to the National Housing Trust Fund (HTF) to help produce and preserve affordable housing for low-income households. Director Thompson responded that the Enterprises “had record contributions last year because they had record acquisitions. The number of loans purchased determines what is contributed to the HTF.”
Director Thompson spoke of the importance of expanding quality, affordable housing for underserved communities, particularly communities of color. Today, the racial homeownership gap between Black and white families is higher than when the “Fair Housing Act” was passed in 1968. In response to an inquiry from Representative Al Lawson (D-FL), Director Thompson explained that “FHFA required Fannie Mae and Freddie Mac to submit equitable housing plans that looked at barriers to homeownership.” FHFA is also implementing programs to address these barriers, like one that includes positive rental payments in credit score calculations for mortgage assessments.
“Safety, soundness, and sustainable access to credit are very important to me and I take the position [of Director] very seriously,” said Director Thompson. “I want to make sure we are marching down the path of safety and soundness, good financial conditions, and equitable access to credit throughout the country.”
View a recording of the hearing and read the witness testimony here.