April 25, 2014
The Honorable Tim Johnson
Chairman Senate Banking Committee
136 Hart Senate Office Building
Washington, DC 20510
The Honorable Mike Crapo
Ranking Member
Senate Banking Committee
239 Dirksen Senate Office Building
Washington, DC 20510
Re: The Termination of the Affordable Housing Goals in the Housing Finance Reform and Tax Payer Protection Act of 2014 – Private Capital Concerns
Dear Chairman Johnson and Ranking Member Crapo:
As a follow-up to the letter that I submitted earlier this week (“Re: the Termination of the Affordable Housing Goals in the Housing Finance Reform and Tax Payer Protection Act of 2014,” on April 23), I am submitting this letter to note further significant concerns that the National Urban League has about the Johnson-Crapo bill and its negative impact on working and middle-class Americans if passed in its current form. In addition to the lack of affordable housing goals to help ensure access to affordable mortgage credit for all creditworthy borrowers, the Johnson-Crapo bill would essentially replace the housing finance system of today with a costly private sector system that will further exclude many in the working and middle class from homeownership. Moreover, this new system will not be required to provide mortgage financing throughout the country at a similar price, meaning there is no duty to provide all communities with mortgage credit – and that is a fundamental problem.
Increased cause for concern is that the Johnson-Crapo bill would replace Fannie Mae and Freddie Mac with new entities that are required to have 10% first-loss capital from private concerns and have private sector guarantors or insurance. This private capital scheme could greatly increase the average mortgage cost by at least $1,400 annually to pay for the private capital. Working families cannot afford this bill.
This is not a commentary on the new mortgage participant issuers and insurers. They are not inherently bad entities. They are simply charging what private companies charge for risky investments – investments that the government absorbed for 80 years because it considered the reward of a stable homeowner society worth it. Johnson-Crapo says it is not.
Click here to read the full letter.
