#165 Spring 2011 — Fair Housing

Sounding the GSE Death Knell

Last year, then-chairman of the House Financial Services Committee Barney Frank told Shelterforce, regarding Fannie Mae and Freddie Mac, “the model of a private shareholder corporation with a public mission […]

U.S. Department of the Treasury

U.S. Department of the Treasury

Last year, then-chairman of the House Financial Services Committee Barney Frank told Shelterforce, regarding Fannie Mae and Freddie Mac, “the model of a private shareholder corporation with a public mission doesn’t work.” HUD/Treasury’s February report to Congress, “Reforming America’s Housing Finance Market,” appears to agree — it is now infamous for its proposal to “wind down” Fannie Mae and Freddie Mac, which have been under FHFA conservatorship since 2008, calling for “private markets — subject to strong oversight and standards for consumer and investor protection” to be “the primary source of mortgage credit [and] bear the burden for losses.”

While having the private market take responsibility for its risk-taking sounds nice, the emphasis on expecting private markets to produce public goods is still curious, given recent history. When the administration championed injecting private capital into public housing (See SF, Summer 2010) there was substantial backlash from people concerned about privatizing public resources and entrusting people’s homes to the whims of an amoral market. Some of the same concerns are following this move, with advocates asking if dissolving Fannie and Freddie will completely undo a 70-year commitment to affordable homeownership.

The administration’s plan, which also calls for larger downpayments and higher fees for home loans, says “Americans should have choices in housing that make sense for them and for their families. This means rental options near good schools and good jobs.” It does not mean, it says, that “our goal is for all Americans to be homeowners.”

We agree that the homeownership-only anthem needs to be phased out. But does this go too far? Would it create a homeownership class that re-forms along all-too-familiar racial and economic lines? The options put forth in the report could lead to just that, according to Barry Zigas, director of housing policy for Consumer Federation of America. While he praised the administration for “long overdue” standards proposals, he told Shelterforce having no government presence outside the FHA would alter the housing market back to include fewer long-term fixed-rate mortgages, higher prices, and less access to secondary markets for smaller banks and credit unions. “That would be hugely puzzling and disappointing,” Zigas said.

OTHER ARTICLES IN THIS ISSUE

  • A Windfall for Los Angeles Landlords “Burdened” with Rent Control

    March 30, 2011

    A Los Angeles councilman says rent control places undue burdens on landlords and proposes a plan to reduce their tax burden.

  • The Rising Tide of Bank Protests

    March 30, 2011

    Despite Dodd-Frank and the Consumer Financial Protection Bureau, distrust for the banking industry in the United States remains palpable, and now we’re beginning to see a sustained, organized counterattack. Bank […]

  • Integrating Schools Is a Matter of Housing Policy

    March 30, 2011

    Inclusionary zoning and economic integration in suburban neighborhoods not only reduces concentration of poverty, it directly improves low-income children’s academic achievement.