Draft Fannie Mae, Freddie Mac Reform Bill Would Hammer Housing, Builders Charge
Unveiled on Friday, draft legislation by the Senate Banking Committee to restructure the regulatory framework of government-sponsored enterprises (GSEs) Fannie Mae, Freddie Mac and the Federal Home Loan Bank System contained alarming provisions for housing and brought a quick response from the nation’s home builders.
“No matter how well-intentioned the original idea was to draft legislation that would increase the financial safety and soundness of the GSEs, a goal we all supported, this discussion draft would do just the opposite,” said Jerry Howard, NAHB executive vice president and CEO. “This bill is very hostile to housing. It will radically alter investors’ perceptions of ‘government sponsorship,’ place housing mission in a backseat position, add an unnecessary capital drag and stymie new innovation of affordable loan products. An immediate impact will be upward pressure on housing costs for millions of working American families.
“There are four elements in this draft proposal that we find most divisive and harmful to housing — receivership, the structure of the new regulator, capital requirements and new activity approval. We are also disturbed by neglect of the critical affordable housing goals component,” he said.
“Inclusion of the proposed receivership provision would unnerve Wall Street, and some bond rating agencies have already publicly stated they would likely downgrade the debt of Fannie Mae and Freddie Mac if this were to occur. A downgraded credit rating would raise their borrowing costs and put upward pressure on interest rates.