It’s commonplace in Washington for policymakers to wait until the public has stopped paying attention before making serious decisions.
Immediately following the Senate Banking Committee's public consideration of a controversial new housing bill just last week, the committee quickly went quiet. But any day now, the committee is set to vote on Johnson-Crapo, a significant piece of legislation that would completely reconstruct the housing finance system as we know it, by eliminating Fannie Mae and Freddie Mac.
In their place, the bill would create a new government-backed mortgage-bond insurer and regulatory agency called the Federal Mortgage Insurance Corporation to oversee the secondary mortgage market.
Given the rush to bring the bill for a vote, it's worth reviewing why this issue is so important to millions of current and prospective African-American homeowners, and why the current proposal is a dangerous one.
In the past five years, the privately-owned, publicly-traded Fannie and Freddie have been central to bringing stability to the federal housing market, with a full return to profitability earlier this year. But with Johnson-Crapo, Congress is threatening to jeopardize that stability and undo years of resilience from American taxpayers. That's the wrong direction.
Instead, Congress should be looking to bolster that stability by expanding access to and ensuring affordability of homeownership for all Americans, and especially for underserved communities.
The problems that African American and other minority borrowers face obtaining access to mortgage credit are well-documented, and should not be a surprise to members of Congress.
The Washington Times reports that home loans have been tough to get for most Americans since the crisis, as banks severely tightened lending standards and caused millions of consumers to go into default and lose their good credit ratings. The credit crunch has been especially harsh for minority communities hit disproportionately by foreclosures.
In fact, only 131,000 black families obtained mortgages in 2012, compared with nearly 600,000 in 2005 before the crisis, according to the Urban Institute Center for Housing Finance Policy. And overall, the share of black borrowers dropped from 8 percent to 4.8 percent over the overall market in that time, and Hispanic borrowers dropped from 13.3 percent of purchases to 8.6 percent.
As written, Johnson-Crapo does not address these underlying structural concerns. According to the Times, some Democrats on the Banking Committee realize that fact, as they’ve asked to revise the legislation to add mandates that would require private lenders to offer loans to Hispanics, blacks and other disadvantaged groups. The fact that these requests have been met with resistance is troubling.
At best, this legislation would preserve a status quo that keeps the dream of homeownership out of the grasp of countless middle- and lower-income African-American families.
That’s not a real reform effort – it’s an affront to the taxpayers who supported Fannie and Freddie, and who are looking for leadership from Congress to give them an honest shot at pursuing the dream of homeownership.
The only meaningful reform is one that serves all Americans – especially those who have been locked out of homeownership through no fault of their own. Preserving and strengthening Fannie and Freddie only expands opportunity and brings more qualified borrowers into the system.
It’s a goal that makes sense for borrowers and lenders, builders and brokers, and hard-hit communities looking to come back from a foreclosure nightmare. What’s more, broadening access to homeownership, by encouraging the responsible use of credit, is an important step for driving entrepreneurship – one of the nation’s economic engines, and one the administration has dedicated ample resources to jumpstarting.Harry Alford is president of the National Black Chamber of Commerce. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.