Last month, I wrote about how the Federal Housing Finance Agency had ordered Fannie Mae and Freddie Mac to start forking over money to “help organizations working on affordable housing.” This week, FHFA Director Mel Watt was in the congressional hot seat over that move.
As expected, the Republican chair of the House Committee on Financial Services, Jeb Hensarling, called into question whether Fannie and Freddie, both in were stable enough to begin restoring payments to the Capital Magnet Fund and the National Housing Trust Fund. The once-regular payments had been on pause since 2008, when both went into conservatorship. “Washington appears to be rolling the dice again,” he said.
Watt stood by the decision, saying Fannie and Freddie have recovered enough to follow their “legal mandate” to trigger growth in the affordable housing sector, and that “prudent safeguards” are in place.
These funds have a demonstrated impact: The $80 million that went into the Capital Magnet Fund in 2010 generated more than $1 billion of investment in housing and other economic development projects.
Another issue that put Watt on the defensive was the move last year for Fannie and Freddie to accept downpayments of as low as 3 percent from first-time creditworthy home buyers. This is seen as an effort to reach out to millennials and other low- or moderate-income purchasers.
Again, the FHFA director assured congressional naysayers that Fannie and Freddie are on an upward trajectory and that there’s no fear that they’ll engage in the same risky activities that contributed to the collapse of the housing market.
The lingering distrust in the government jumpstarting the housing market was on full display on Monday’s Daily Show. Jon Stewart grilled HUD Secretary Julián Castro on the Federal Housing Administration’s announcement to reduce annual mortgage insurance premiums.
Castro assured Stewart that, “the landscape of lending and of secondary mortgage products has changed significantly since [the collapse], for the better, obviously,” and, “the laws have changed so that you’re not going to see with Fannie and Freddie, the same kind of risky products as before.”
The Equity Factor is made possible with the support of the Surdna Foundation.
Alexis Stephens was Next City’s 2014-2015 equitable cities fellow. She’s written about housing, pop culture, global music subcultures, and more for publications like Shelterforce, Rolling Stone, SPIN, and MTV Iggy. She has a B.A. in urban studies from Barnard College and an M.S. in historic preservation from the University of Pennsylvania.
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