NAACP Calls For Housing Finance Policies That Increase Homeownership; Applauds
President Obama For Not Endorsing The Corker-Warner Legislation
WASHINGTON, Aug. 22, 2013
STATEMENT BY HILARY O. SHELTON
SENIOR VICE PRESIDENT FOR ADVOCACY FOR THE NAACP
WASHINGTON, Aug. 22, 2013 /PRNewswire-USNewswire/ --The NAACP strongly
believes that homeownership is a catalyst for safer and more secure
communities, and is an important vehicle for creating and sustaining wealth in
communities of color. For decades, the equity in our homes has provided the
capital for start-up businesses and college educations for our children.
In the aftermath of the housing collapse in 2007, government policies have
focused on helping Wall Street and the Big Banks, not the middle-class or
families of color. Minorities lost millions of dollars of wealth from the
sharp decline in housing values, yet we are faced with a series of public
policies that offer little assistance to troubled homeowners and are now
poised to construct new roadblocks on the path to homeownership.
We want to applaud President Obama for not endorsing the Corker-Warner
legislation; the Corker-Warner bill is a threat to the middle-class, and to
communities of color. It will take us backwards and not forwards.
Before the 1930s, home mortgages were largely short-term loans that only the
upper class could afford - only the privileged could purchase a home in
America. After the Great Depression, the nation enacted polices and incentives
that made the 30-year mortgage, with no pre-payment penalties, the foundation
of housing finance. This new standard loan made homeownership affordable to
more people, an expansion that would not have been sustained without federal
support through Fannie Mae, the Federal Housing Administration, the Federal
Home Loan Bank (FHLBank) System, the mortgage interest deduction and other
With these agencies and policies in place, America's housing market grew
substantially, lifting the economy as well as increasing the wealth of many
urban and rural families. From the 1940s until the recent mortgage crisis,
homeownership rates rose from 40 percent to more than 66 percent. It changed
America, helping build middle-class communities. These policies helped build
wealth in working-class families—whites and people of color. Families built
solid financial security.
Any restructuring of the housing finance industry must sustain home ownership
opportunities so the next generation can have opportunities to prosper.
But what we are seeing are proposals that will make it virtually impossible
for many in the middle - class, and particularly people of color, to purchase
homes in the future.
In fact, none of the legislation under consideration will assure that there
will be low-cost, mortgage financing available for families and individuals
that have good credit histories, stable income and want to buy homes. America
needs a fair housing finance system that can spur a robust recovery for
housing, as well as the overall economy.
Going forward, our nation's housing financing system must balance the needs of
families with the needs of Big Banks and Wall Street. To be blunt, the pending
legislation fails to prioritize the needs of working families. Since the
housing market crash in 2007, measures have focused on restoring Wall Street
and the Big Banks, with not enough attention on Main Street and the homeowners
facing foreclosures. By raising interest rates, insurance premiums and down
payments, the pending legislation will construct more roadblocks for working
families. These measures will represent more failed public policy.
Specifically, here are some of our concerns about the Corker-Warner
oIt fails to mention that the mission of any successor to Fannie Mae and
Freddie Mac must include that of ensuring universally available, low cost
mortgage credit for working and middle class families. Fannie Mae and
Freddie Mac perform that function and are measured by that objective. The
Corker-Warner created insurance fund does not have that goal/objective.
oThe mission of any successor to Fannie Mae and Freddie Mac must include
ensuring that universally available, low cost mortgage credit is available
for working and middle class families. Fannie Mae and Freddie Mac perform
that function and are measured by that objective. The Corker-Warner
created insurance fund does not have that goal/objective.
oThe affordable housing entity contained in the Corker-Warner bill will not
meet the housing finance needs of very low, low, moderate and
middle-income families. Middle and moderate-income families have about $5
trillion in outstanding mortgages today. The fund would have about $250
billion. The fund is necessary to provide rental subsidies and some lower
income homeownership gap financing, but it needs to be charged with
meeting the credit needs of at a minimum working and middle-income
oAn explicit on budget guarantee will squeeze funding from other lower
income housing programs and FHA.The current implicit guarantee that
Fannie Mae and Freddie Mac enjoy is not on budget and thus does not impact
FHA funding or funding for other housing credit program. Putting the FMIC
on budget could also allow housing opponents to limit the amount of
insurance funds available for mortgage finance independent of market
oIt allows unlimited guarantee fees to be charged. The mortgage insurance
fund would be paid for by its guarantee fee income. The guarantee fees
would be largely based upon potential risk, with no caps, and these fees
could be passed on to struggling homebuyers because there is no
prohibition on the fees being included on the mortgage cost to the
homebuyer. Unlimited guarantee fees could also be raised to shift the
mortgage backed securities market toward private label mortgage backed
securities—the very instruments used to expand the subprime and predatory
mortgage markets in the 2004-2008 period.
oNon-depository banks and intermediaries that would be issuing MBS with
government insurance would not be required to have solid Community
Reinvestment Act ("CRA") ratings, meet Home Mortgage Disclosure Act
("HMDA") standards or meet proxy standards for CRA or HMDA (depository
institutions would obviously have to be CRA compliant).
oNothing would ensure that insurance is being provided to entities that
serve low, moderate and middle income communities or that meet the race
and gender scrutiny of HMDA. Fannie Mae and Freddie Mac as secondary
market entities were subjected to ensuring that they provided secondary
market access for lower, moderate and middle-income communities.
oIt facilitates big institutional intermediaries. There is no requirement
for minority participation in the private mortgage insurers or servicers
that are eligible to participate. The governing structure of the insurance
fund does not include any community representation. The 5-person
commission that would govern the FMIC should include someone engaged in
community based lending or a policy maker with experience in low, moderate
and middle income housing finance.
Our communities need a finance system that provides credit to a broad and
diverse population, rather than one in which credit and housing choices are
more costly, more limited, and less sustainable, especially for low- and
moderate-income households, households of color, and rural households. Without
this broad access to credit, neither buyers nor sellers can transact business
as they would like, which could once again destabilize home values.
It is critical that the government not withdraw from supporting
homeownership. There needs to be sustained public-private partnerships that
can provide liquidity for lenders and support the 30-year-fixed rate mortgage,
a product that has played a major role in supporting homeownership for
(Hilary O. Sheltonis the Senior Vice President for Advocacy for the NAACP
where he directs the NAACP Washington Bureau. Mr. Shelton has more than 20
years of experience in government relations and federal advocacy.)
Founded in 1909, the NAACP is the nation's oldest and largestnonpartisan
civil rights organization. Its members throughout the United States and the
world are the premier advocates for civil rights in their communities.You
can read more about the NAACP's work and our five "Game Changer" issue areas
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