Chairman Hensarling Outlines Steps for Sustainable Housing Policy
Apr 24 -
Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today’s committee hearing on regulatory impediments to the re-entry of private capital in the housing finance sector. The committee has been holding a series of hearings on the need to create a sustainable housing finance system:
“This is the seventh full or sub- committee hearing that we have had on the topic dedicated to forging a new sustainable housing policy for America. One that is sustainable for homeowners, one that is sustainable for taxpayers, one sustainable for our economy.
“Clearly all Americans want a healthier economy and they want a fair opportunity for all Americans to be able to buy a home they can actually afford to keep. It is clearly time to displace the false hopes and broken dreams which have arisen from a system of misdirected government policies that regrettably incented, browbeat, or mandated financial institutions to loan money to people to buy homes they all too often could not afford to keep.
“Regrettably, on this topic there have been a couple of recent disturbing press reports concerning actions of the administration.
On April 2, the Washington Post had the headline ‘Obama Administration pushes banks to make home loans to people with weaker credit.’
“Had the story been posted April 1, I might have thought it was an April Fools’ joke. I asked the question, ‘Have we as a nation learned nothing?’ The article went on to say that the Obama housing officials were urging Obama justice officials to offer banks the equivalent of ‘get out of jail free’ cards if they would lend money to folks with weaker credit.
“Ed Pinto, the former top Fannie Mae executive and a recent witness before our committee, said in response, ‘that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from.’
“The other disturbing headline came from the L.A. Times and many other major publications on April 10. The L. A. Times headline: ‘Obama budget projects $943 million bailout for key housing agency.’
“Regrettably, the president’s budget does indeed call for a bailout of FHA as that institution has abandoned its historical mission, endangered the future of the agency, and regrettably put taxpayers at risk.
“Many of us believe that there are three steps to a sustainable housing policy for our nation.
“Step number one would be to gradually reduce and eventually eliminate the government guarantee of Fannie & Freddie. Second step would be to reform the FHA so that its mission is explicit, targeted, and paid for. And three, to remove the artificial barriers to private capital coming into the market, which is the subject of today’s hearing
“Now, it may be a challenge for members of this committee to come to agreement on all of the positions of the first two steps. But surely, surely, we can find some way to come together on the third, and that is removing the barriers to entry of private capital coming into this market.
“After all, the administration has clearly been on the record urging us to do just that.
“I quote from the administration’s housing white paper: ‘we need to scale back the role of government in the mortgage market, and promote the return of private capital to a healthier, more robust mortgage market.’ Again, in the administration’s white paper that regrettably has been left to gather dust for about two years.
“Then-Treasury Secretary Geithner on behalf of the administration said, ‘The administration is committed to a system in which the private market – subject to strong oversight and strong consumer and investor protections – is the primary source of mortgage credit. We are committed to a system in which the private market – not American taxpayers – bears the burden for losses.’
“HUD Secretary Donovan: ‘As we have made clear, this administration believes that private capital needs to come back -- and that government’s footprint in the housing market needs to be much smaller.’
“In order to do this, some provisions of Dodd-Frank, particularly QM and QRM, will have to be carefully examined given their potential impact on the mortgage market.
“I know that many of my friends on the other side of the aisle have much invested in the Dodd-Frank law and its brand, and I respect that. But if you agree that private capital and not taxpayer capital should be the foundation of our housing finance system, then I hope you will have open minds that perhaps some limited number of provisions of the Dodd-Frank law perhaps could be refined and improved upon at this time.”