House Panel Holds Hearing on Housing Finance Reform

The House Financial Services Committee held a hearing on October 3 on sustainable housing finance. During the hearing, Federal Housing Finance Agency (FHFA) Director Melvin Watt updated the committee on the government-sponsored enterprises (GSE), Fannie Mae and Freddie Mac, and the Federal Home Loan Banks. Director Watt fielded questions regarding the riskiness of loans, alternative credit scoring methods, and efforts to expand affordable housing, including through the Housing Trust Fund (HTF) which is funded through a small assessment on the GSEs’ annual book of business.

Ranking Member Maxine Waters (D-CA) cited NLIHC’s Out of Reach data when asking Director Watt how FHFA is working to address the current affordable housing crisis, including the agency’s role in the HTF. Director Watt said he decided to lift the suspension on the GSEs’ obligation to fund the HTF because they were financially stable and continue to be so today. He added that the HTF will continue to be funded. He assured the committee that FHFA would never use money set aside for the HTF for other purposes. Director Watt said that while the FHFA has no control over the distribution of HTF dollars, FHFA is committed to expanding affordable housing through safe and secure loans.

Republicans’ questions focused on the potential risks FHFA loans pose to tax payers and the involvement of the private sector. The GSEs are currently under U.S. government conservatorship, so many Republican committee members expressed concerns about loan criteria and potential risks. Others asserted that GSEs are an impediment to growth in the private loan and mortgage sector. Director Watt responded that he is following the statutory obligations that Congress created and will follow any new guidelines should Congress pass housing finance reform.

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