U.S. Senators are in negotiations over legislation to dramatically restructure our nation’s housing finance system. A now public version of the draft bill is indicative of the legislative trajectory. In a recent paper, proponents of this proposed housing finance legislation argue that this draft bill would advance housing affordability. Their analysis of the proposed system, however, has critical unsupportable assumptions and omissions.
The analysis claims to make an equal comparison of the current and proposed system, but it instead uses numbers and assumptions that substantially inflate the cost of the current system. It also makes overly optimistic assumptions about costs and benefits of the proposed system, and it omits other costs entirely. When these assumptions are corrected, it is clear that the cost of the proposed system would be far greater than the current system.
Most important, the proposed legislation would jettison the very foundation blocks of the obligation of companies using government backing to promote the public interest, including: serving a national market, including rural and urban areas; serving all lenders equitably, including community banks and credit unions; promoting fair housing and increasing access to affordable mortgage credit for underserved borrowers; and meeting enforceable affordable housing goals and enforcement provisions. Under the proposal, these would be repealed and replaced with unenforceable aspirations and even explicit prohibitions on interfering with the “business judgment” of those receiving and profiting from government backing.
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