Newsroom

May 11, 2017

Watt reiterates need for legislative reforms to housing finance

Federal Housing Finance Agency Director Mel Watt told members of the Senate Banking Committee Thursday that Congress needs to make legislative reforms to government-sponsored enterprises Fannie Mae and Freddie Mac, saying their "conservatorships are not sustainable."

In his opening statement, Watt said "these conservatorships are not sustainable and they need to end as soon as Congress can chart the way forward on housing finance reform."

NAFCU's priority in any reforms of the housing finance system remains to ensure credit unions' access to the secondary mortgage market. The association has also urged that Congress put into place safeguards that will prevent discrimination based on institution type or asset size.

Of note, Sen. Cortez Masto, D-Nev., asked Watt about the potential for community lenders being effectively boxed out in housing finance system reform. Watt said his intention is to treat large and small lenders the same.

Senate Banking Committee Chairman Mike Crapo, R-Idaho, said the reform of Fannie Mae and Freddie Mac is "a key priority" for Congress. He also expressed concerns about the companies' common securitization platform and credit-risk transfer in his opening statement. NAFCU has also noted concerns about limiting front-end credit risk transactions and warned against rushing the overall process, which could hurt credit unions' access to the secondary mortgage market.

Crapo also told Watt of his concerns regarding the GSEs suspending dividend payments to taxpayers. Fannie Mae and Freddie Mac send quarterly dividends to taxpayers as part of a contract with Treasury. Watt told the committee he has the authority to withhold these profits without approval from Congress and said it's something he has considered.

Eliminating these dividend payments would allow the GSEs to rebuild their capital, according to shareholders, and could eventually lead to their release from government conservatorship. As of Jan. 1, the companies will be completely reliant on a $258 billion line of credit from Treasury to cover any losses.