FHFA Director Delivers Report to Congress
On Wednesday, November 19, the Senate Banking, Housing, and Urban Affairs Committee held an oversight hearing of the Federal Housing Finance Agency (FHFA). The Director for the Agency, Melvin Watt, delivered a report on the Agency’s recent activity and answered questions on specific housing finance topics. This is the first time that Watt has appeared before the Senate Banking Committee for an oversight hearing.
Both Chairman Tim Johnson (D-SD) and Ranking Member Michael Crapo (R-ID) used their opening statements to highlight the risk that remains from the continued conservatorship of the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Senator Crapo was more critical than Johnson; he took issue with some of Director Watt’s choices that he believes may perpetuate the status quo of tax payer risk due to Freddie and Fannie’s requirements on single family home mortgages. Throughout the hearing, there was widespread agreement among Watt and Senators from both parties that the current housing finance system needs substantial reform, but specific reform proposals were not discussed.
Director Watt began his testimony by outlining the key priorities for the FHFA in the coming months under the Agency’s 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac. While many of these priorities focused on the single-family business of the GSEs, Director Watt reflected on the essential financing provided for affordable multifamily housing:
“FHFA has continued to emphasize the Enterprises’ important role in the affordable rental housing market, and FHFA provided the Enterprises with additional capacity to provide financing for affordable multifamily properties beyond the multifamily volume cap established in the 2014 Conservatorship Scorecard. In establishing this policy, the focus is not for the Enterprises to compete where there is private sector coverage of the multifamily market, but to ensure that affordable housing is available and that the housing needs of people in rural and other underserved areas are met. On multifamily purchases, we are also requiring the companies to continue sharing risk with the private sector, which Freddie Mac does through a capital markets structure and Fannie Mae does through a risk sharing model. Both approaches transfer significant risk to the private market.”
Latter, Director Watt was asked questions about specific FHFA operations. Senator Jack Reed (D-RI) asked about Watt’s intentions for the National Housing Trust Fund, an affordable housing production program that will complement existing Federal, state and local programs. The Trust Fund was established in July of 2008 under the Housing and Economic Recovery Act (HERA) but contributions were halted when Freddie and Fannie were placed into conservatorship by the U.S. Treasury in September of 2008. Watt replied that while there are statutory provisions that prevent contributions to the Trust Fund, circumstances have changed over recent years. He continued that FHFA is currently examining whether circumstances have changed enough to allow both to begin contributing to the Trust Fund. He said the agency will announce its decision by the end of the year.
To view Director Watt’s testimony, please click here
To watch an archived webcast of this hearing, please click here
Nomination Confirmation
Also during this Senate Banking hearing with Director Mel Watt, a quorum was reached and Chairman Johnson interrupted the proceedings in order for the members to vote on the nomination of Ms. Lourdes Maria Castro-Ramirez to be the new Assistant Secretary of HUD’s Office of Public and Indian Housing.
Her nomination was passed by a voice vote; the entire Senate will vote on this nomination at a latter date.
Immigration Debate may Complicate Appropriations Process
On Thursday, November 20, 2014, President Obama announced a series of executive actions that is prepared to take in order to address various immigration issues. This announcement has garnered heavy criticism from the Republican party and may cause snags in the FY 2015 Appropriations process.
Currently the federal government is operating under a continuing resolution that maintains funding levels at the FY 2014 amounts. However, this agreement ends on December 11, and lawmakers were to set to begin talks on the figures for 2015. With the harsh criticisms and partisan disputes now raging after Obama’s announcement, NAHMA is unsure of how the appropriations process will flow. We will track the appropriations process and alert members of the chosen method when it is disclosed by lawmakers.