National Association of Home Builders Opposes Senate Banking Committee's Draft Legislation on GSEs

The National Association of Home Builders (NAHB) has issued a statement opposing the discussion draft legislation to restructure the regulatory framework of government-sponsored enterprises (GSEs) Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System. The draft legislation, released by the Senate Banking Committee, has been criticized by NAHB for its potential to harm the housing market. Jerry Howard, NAHB's executive vice president and CEO, stated that the bill would "radically alter investors' perceptions of 'government sponsorship,' place housing mission in a backseat position, add an unnecessary capital drag, and stymie new innovation of affordable loan products."

Key Takeaways:

• The proposed receivership provision would unnerve Wall Street and potentially lead to a downgraded credit rating for Fannie Mae and Freddie Mac, increasing their borrowing costs and interest rates for millions of working American families.
• The proposed structure of the new regulator would put housing on an unequal footing, giving too much power to a single director while the advisory board has no real clout.
• Unnecessarily raising the minimum capital requirements for Fannie Mae and Freddie Mac would take capital out of the housing market, making it harder for the two financial institutions to expand mortgage funding and provide consumer-friendly loans.
• The draft bill would handcuff the GSEs, hindering their ability to produce new mortgage innovations and offering resourceful products like interest-only loans, zero-downpayment mortgages, and loans that allow borrowers to skip payments without being in default.
• The draft bill neglects the critical affordable housing goals component and fails to establish a more challenging affordable housing goals system for the GSEs.
• The proposal effectively does away with the national priority of promoting homeownership, a goal originally designated for GSEs by Congress.

Statistics:

• Estimated impact on housing costs for million of working American families due to the proposed receivership provision.
• Reported statements from bond rating agencies on the potential downgrading of Fannie Mae and Freddie Mac's debt.
• Number of Cabinet secretaries on the proposed advisory board (4).
• Proposed increase in minimum capital requirements for Fannie Mae and Freddie Mac (listed as "unnecessarily high").
• Percentage of consumers who benefit from resourceful products like interest-only loans, zero-downpayment mortgages, and loans that allow borrowers to skip payments without being in default.
• Number of years since the GSEs were designated as housing "government-sponsored" enterprises.

Sources:

• NAHB (National Association of Home Builders), "Statement Opposing Senate Banking Committee's Draft Legislation on GSEs"
• Statement by Jerry Howard, NAHB executive vice president and CEO
• Senate Banking Committee, "Discussion Draft Legislation on GSEs"
• Bond rating agencies, reported statements on potential downgrading of Fannie Mae and Freddie Mac's debt.