The Center for Responsible Lending (CRL) concedes that Fannie Mae and Freddie Mac need serious reform, but adds "we must get these reforms right."
Among the Obama administration’s several proposals, CRL believes only one -- the one that maintains a limited role for the two -- even has potential for ensuring all families have access to home loans and achieving stability in the housing market.
Pitfalls
The group claims completely eliminating a mortgage finance system "that worked well for decades" carries enormous risks -- including these:
- Loss of family wealth and less economic security. The American Dream of home ownership is alive and well, but a plan to end reliable funding of mortgages means that fewer creditworthy working families would have access to mortgage credit.
- Lending inequities that destabilize the market. The administration’s plan would do little to correct inequities that created an opening for predatory lenders. Moreover, the plan does nothing to strengthen enforcement of fair lending and anti-discrimination laws.
- A less competitive market. Banks of all sizes, not just the largest, need equal access to lending capital -- which in turn would be better for small businesses and job creation.
Limited support
The best option offered by the administration, according to CRL, allows for some government backing of mortgages -- but with tighter limits on the loans supported and stronger protections against mortgage defaults.
The group says it also supports the recommendations for reforming mortgage servicing practices. However, it has significant concerns about other elements in the proposal -- most notably the arbitrary 10 percent down payment requirement.
The status quo is not an option, CRL maintains, adding that it supports substantial changes that would result in affordable mortgages for all qualified borrowers, a streamlined role for government, and a strong housing market that creates homeownership and jobs.
The group says it cannot support a plan that "leaves the economy and taxpayers at risk."
