Top administration aides are pushing for President Obama to endorse a new mortgage scheme in his State of the Union address that housing advocates fear would kill mortgages to low income Americans and add up to $1,400 in fees to every new loan.
Housing and Urban Development Secretary Shaun Donovan and Obama economic aide Gene Sperling urged a key senator to press the president to support the plan that would replace mortgage giants Fannie Mae and Freddie Mac with another organization, according to the activists.
The legislation, dubbed Corker-Warner, after sponsors Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., would replace the two mortgage outfits with a privately capitalized system. The duo believe that it would protect taxpayers from future economic downturns.
Sources say that Donovan and Sperling asked Sen. Tim Johnson, D-S.D., who chairs the Senate Banking Committee, to help get the president to back the Corker-Warner plan and mention it in his State of the Union address to Congress. Johnson has been skeptical of the Corker-Warner bill, saying he wants changes in it. A Republican House member has a dueling plan.
Housing activists told Secrets that although admirable in its effort to shore up the mortgage system, the Corker-Warner legislation would have the effect of only approving the most creditworthy applicants. And a fee to be charged to build a support kitty of cash could add up to $1,400 a year to every mortgage.
“Working-class people and poor people would get screwed,” said one activist of the Sperling-Donovan effort.
In addition, several housing activists and groups from around the nation have mounted a letter-writing campaign to senators urging them to oppose Corker-Warner. One letter, provided to Secrets with the agreement we wouldn’t identify the writer, said:
“Corker-Warner legislation would increase the cost of homeownership for everyone. Our concern is that the increase is not limited and has the potential to create significant cost barriers to homeownership for urban communities. These barriers could come in the form of subjective unidentified ‘risk’ profiles of a community by both the originators and the ‘private capital’ thereby deeming a neighborhood ‘risky’ which could create modern day redlining.”
Right at a time when we’re seeing the housing market and mortgage industry recover, “this would be an economic disaster. We want to encourage people to get a house, not drive them out of the market,” added the housing activist.
It is unclear why the duo are pushing to have Obama mention the Corker-Warner plan in his speech. Housing activists say the legislation contrast sharply with the president’s recent push to address inequalities. In the past, Obama has indicated support for the overall efforts in Congress to reform mortgages.
Paul Bedard, the Washington Examiner's "Washington Secrets" columnist, can be contacted at firstname.lastname@example.org.