FCIC Report Puts Blame Where It Belongs: On Wall Street & Regulators

What to do with Fannie and Freddie is the question of the hour for the mortgage finance industry. Congress should not be myopic or reactionary in dealing with this issue. We must recognize that for 95% of Fannie and Freddie’s history they did a great job in assisting millions of Americans to realize their dream of homeownership. Had the regulatory body overseeing the GSEs had the authority and commitment, they could have been steered them away from following Wall Street into the sub-prime abyss. Congress shouldn’t simply return Fannie and Freddie to their former status.  Instead they need to empower FHFA to have the resources and authority to prohibit high risk venturing by the GSEs, and they should require adequate capitalization and limit market share these two entities.

Fannie and Freddie are saddled with billions of dollars of debt, which is not going to miraculously disappear.  We can absorb those losses over a long period of time or we can deal with them more immediately by having many of the loans in their portfolio reduced through refinancing and modifications.

Return the GSEs to their original mission with adequate oversight and financial safeguards and it is likely that the rebirth of the mortgage finance industry will happen sooner than a lot later. Writing down loans could prevent millions of foreclosures, and the loss of a home for these families.

If Congress and the Administration intentionally throw the fox back into the henhouse by allowing the private market to take over Fannie and Freddie, they will have repeated the grave mistakes of the past that had dire consequences for lower and middle income families. We deregulated the financial industry and looked what we got: the worst economic crisis since the Great Depression.

 

About the National Community Reinvestment Coalition (NCRC):
The National Community Reinvestment Coalition is an association of more than 600 community-based organizations that promote access to basic banking services, including credit and savings, to create and sustain affordable housing, job development, and vibrant communities for America’s working families.

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