Center for Responsible Lending & National Urban League Report Shows Senators’ Proposal Would Cost More, Deliver Less
WASHINGTON, D.C. – (RealEstateRama) — A new research report by the Center for Responsible Lending (CRL) and National Urban League critiques a legislative discussion draft by U.S. Senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.) to restructure the nation’s housing finance system, and it criticizes recently published papers supporting it.
CRL and the National Urban League’s report finds that the proposed legislation repeals the important public interest mandates within the current system and replaces them with weak incentives that will greatly harm the overall housing market. The report also finds that cost assumptions in the paper supporting the legislation are incorrect and once corrected will drive up costs for lower-wealth borrowers.
The new report, Senate GSE Reform Proposal: A Blow to Affordable Housing and Harmful to the Overall Housing Market, is jointly authored by CRL President Mike Calhoun, National Urban League President and CEO Marc Morial and senior financial economist Michael F. Molesky. Together they call for a system that supports opportunity for current and future generations to achieve homeownership as opposed to it only being reserved for those who are financially well off.
The report offers that administrative reform must continue to build upon the significant reforms begun in the bipartisan Housing and Economic Recovery Act of 2008. Moreover, a central purpose of government backing is that the housing finance system serves all markets across the country, all lenders, and all credit-worthy borrowers.
“Our recent housing past is replete with risk that eventually harmed consumers, communities, and the entire economy,” said CRL President Mike Calhoun. “A doubtful structure of guarantors awarded unenforceable duties is simply not in our nation’s best interest. Nor is supporting systemic changes that omit community banks, credit unions, and other small lenders. Now as the 50th anniversary of the Fair Housing Act nears, housing finance reform should embrace housing affordability, taxpayer protection, and a duty-to-serve all markets and all credit-worthy borrows.”
The authors point out how claimed cost savings in the proposed system would evaporate when reasonable assumptions are applied. In fact, the proposed system would be more expensive even under optimistic projections.
Most importantly, the proposal would deconstruct the public interest foundation of our housing finance system. It would eliminate the affordable housing goals, and the broad duty-to-serve all creditworthy borrowers. The proposal would also weaken regulatory oversight by preventing the regulator from reviewing or approving affordable housing plans of the new companies in the system. These companies – with the backing of taxpayer dollars – would be able to serve only the wealthiest borrowers or regions of the country.
“Although much of the housing market has recovered in recent years, many Americans have either not benefited or have even lost ground,” said National Urban League President Marc Morial. “Looking ahead, we must shun ill-advised efforts to retreat from serving the entire market. Millennials and people of color deserve the opportunity to pursue their own American Dreams. And existing homeowners, especially older Americans need buyers when they are ready to downsize or retire. The financial glue connecting these generations is affordable mortgage credit.”