Affordable Housing: Goals, Duties and Assessments

Congress is considering making fundamental changes to the affordable housing obligations of the GSEs. Possible changes being discussed are creating an affordable housing fund that would be financed through contributions made by Freddie Mac and Fannie Mae, redefining the housing goals, and creating a statutory "duty to serve" underserved markets.

Each of these changes to our affordable housing obligations would have a significant impact on the GSEs. All three simultaneously – especially in combination with the capital, portfolio and prior approval provisions – could push us past the tipping point. Our ability to perform our mission depends upon our ability to attract shareholder capital and compete in the marketplace. And this ability is affected by the cumulative amount of regulation and obligations we operate under – this is the focus of our concern.

Our Position

Accordingly, we would urge Congress to consider the following principles in the context of reform of GSE mission responsibilities:

• Legislative reform that addresses the GSEs' affordable housing mission must be holistic in approach. In the context of current legislative proposals, efforts to amend the goals regime, create an affordable housing fund, and establish a duty to serve underserved markets, must consider the interplay among, and cumulative impact of, these proposals.
• Efforts to amend the goals regime (and related proposals) should foster innovation, leveraging market developments and strategies, in expanding homeownership and rental opportunities for low-income families and underserved communities.
• The goals regime should refrain from imposing numerous, difficult-to-administer goals with potentially overlapping objectives. Rather, the goals should promote efficiency in directing benefits through the secondary market to targeted groups, align with the GSEs' other mission objectives – liquidity and stability, and encourage the development of affordability initiatives through incentives (rather than simply through rigid mandates).
• The goals regime, and any targets thereunder, must be reflective of market conditions, recognizing the GSEs' role as secondary market participants.

In short, expansion of the GSE mission responsibilities is a very important component of this legislation. Expanded affordable housing mission requirements should be designed to work synergistically with each other, and more broadly with the other GSE statutory purposes of providing liquidity and stability. Further, they should not create unintended negative consequences for the long-term viability of the franchise, the markets we support and the homeowners and renters we serve. In this vein, we acknowledge the efforts of HUD Secretary Jackson in his administration of the GSE housing goals.