rushing to action. There is no shortage of opinions and strongly held viewpoints on these issues. We concur with the sentiments expressed by a number of Committee Members that it is imperative that any regulatory structuring be done right, given its potential impact on our crucial housing sector and on community banks' continued ability to meet the lending needs of Main Street America. I thank you for the opportunity today to testify, and I would be pleased to answer any questions. Chairman SHELBY. Thank you. Mr. Fishbein. STATEMENT OF ALLEN J. FISHBEIN DIRECTOR FOR HOUSING AND CREDIT POLICY CONSUMER FEDERATION OF AMERICA, NATIONAL ASSOCIATION OF CONSUMER ADVOCATES, NATIONAL COMMUNITY REINVESTMENT COALITION, NATIONAL CONGRESS FOR COMMUNITY ECONOMIC DEVELOPMENT AND NATIONAL FAIR HOUSING ALLIANCE Mr. FISHBEIN. Thank you, Mr. Chairman, Senator Sarbanes, and Members of the Committee. My name is Allen Fishbein, and I am Director of Housing and Credit Policy for the Consumer Federation of America, and we appreciate the opportunity to testify on proposals for improving the regulation of housing Government Sponsored Enterprises. My opening statement today is also on behalf of the following organizations: The National Association of Consumer Advocates, the National Community Reinvestment Coalition, National Congress for Community Economic Development, and the National Fair Housing Alliance. As national consumer community and civil rights organizations committed to the promotion of fair and affordable housing for all of America's citizens, we watch with considerable interest the ongoing debate about possible changes to the regulatory structure for Fannie Mae and Freddie Mac, and wanted to share a few of our observations. We appreciate those in Congress who desire to assure the adequacy of safety and soundness and mission-related requirements for the GSE's. We also urge that Congress be very careful in tinkering with the GSE's' basic overall regulatory structure. At a minimum such changes to the regulatory structure should do no harm to the GSE's' housing mission. However, we also believe that the current debate provides an opportunity to clarify those areas of the GSE's' affordable housing mission that should be expanded. Fannie Mae and Freddie Mac have fulfilled an important part of their mission by providing affordable housing capital for low- and moderateincome and minority households, yet much remains for the GSE's to accomplish in expanding fair and affordable housing opportunities for the residents of our Nation's underserved communities, such as providing greater assistance to first-time minority and lowincome homeowners, securitizing multifamily rental mortgage products. Similarly, while the GSE's have been industry leaders in adopting policies to combat a number of predatory lending practices such as their repudiation of the purchase of single-premium credit life insurance products, they have yet to address certain other egregious lending practices. More specifically, we believe important improvements to present affordable housing goals requirement are desirable. Clearly, the establishment of these goals has served an important function, encouraging the GSE's to better serve the needs of underserved areas and low- and moderate-income households, and in fact, both Enterprises have consistently met or exceeded the goal level set for them. Nonetheless, the three statutory goals in place do not permit HUD to focus sufficient GSE attention to addressing some of the neediest segments of the mortgage market. Establishing an additional GSE home purchase goal and providing HUD with supplemental authority to set sub goals for GSE activity for particularly needs within the overall statutory goals, while not diminishing the ability of the GSE's to serve the needs of all consumers refinancing loans would enhance the overall effectiveness of this important mandate. Also, reform of the GSE's' housing goals should include provisions to expand opportunities for public input into this important area of regulation. Our strong interest in affordable housing extends to other aspects of regulatory restructuring as well. We are particularly concerned that proposals to shift general charter oversight and new program approval authority away from HUD to the Treasury Department will detract from the regulatory focus on the GSE's' performance of their housing mission. At the same time, funding the reasonable cost of this regulation through direct assessments of the GSE's and not through the appropriations process would go a long way in strengthening oversight capacity. We are also concerned with deliberations around two regulatory areas, capital requirements and the program approval process. First, the GSE's' capital requirement is one of the most critical and sensitive issues. We recognize that the establishment of appropriate capital requirements may at times involve tradeoffs, but we fear that unnecessary increases in capital requirements, particularly the minimum requirement, could result in a higher cost to homebuyers. Second, in evaluating any changes to the current program or approval process, a delicate balance is required between a careful examination of whether a new GSE product serves its important public mission and the need to not overburden these organizations' innovative efforts to provide new lending opportunities in the most difficult to serve communities. While there may be a need to improve the current approval process, we urge you to proceed cautiously and resist efforts to over encumber this process. While my testimony mainly focuses on regulatory oversight of Fannie Mae and Freddie Mac, we also offer the following comments on the regulation of the other GSE's, the Federal Home Loan Bank System. We believe the Federal Home Loan Bank system has evolved and must also have clear and specific housing goals that challenge lenders to better server underserved populations. Should Congress decide to abolish the Federal Housing Finance Board, the System's regulator, and transfer authority to another agency, we strongly prefer that mission oversight be transferred to HUD and that the Department also be provided with authority to establish new affordable housing requirements to ensure that activities undertaken by the Federal Home Loan Banks are targeted to lowand moderate-income housing and other underserved community needs. In closing, we thank you, Mr. Chairman, and Senator Sarbanes for your work and attempting to strengthen the effectiveness of the GSE's, to serve the housing needs of America's underserved populations. We urge that you support provisions to strengthen the housing goals requirement, but also proceed with caution and resist the urge to make changes to their status or their charter that might result in fewer affordable housing opportunities. Thank you for this opportunity to testify and I would be glad to answer any questions you have. Chairman SHELBY. Thank you. Mr. Couch. STATEMENT OF ROBERT M. COUCH CHAIRMAN, MORTGAGE BANKERS ASSOCIATION Mr. COUCH. Thank you. Chairman Shelby, Ranking Member Sarbanes, and distinguished Committee Members, thank you for inviting the Mortgage Bankers Association to speak at this important hearing. MBA members originate loans in the primary mortgage market and then sell those loans to Fannie Mae and Freddie Mac. MBA therefore has a keen interest in maintaining the safety and soundness of our country's real estate finance system. Fannie Mae and Freddie Mac play two important roles in the American home finance system. First, they provide market liquidity. Second, the buy affordable housing loans from lenders so that lower-income Americans and those living in underserved areas can get access to housing credit. Obviously, it is imperative to have effective oversight of the GSE's. The Mortgage Bankers Association endorses the principles for GSE regulation laid out by Secretary Snow and Secretary Martinez before the Committee earlier this month. Further, the Mortgage Bankers support certain core principles for effective regulation of Fannie Mae and Freddie Mac. First, effective safety and soundness oversight is vital. The Treasury Department successfully regulates both national banks and Federal thrifts and has successfully demonstrated its ability to fulfill the role of a financial safety and soundness regulator. The Mortgage Bankers support establishing Treasury as the safety and soundness regulator for Fannie Mae and Freddie Mac. Second, the GSE regulators, both within the Treasury and HUD, need to have adequate funding if they are going to live up to their important duties. The Mortgage Bankers Association urges this Committee to look at the Office of Thrift Supervision funding mechanism in drafting its legislation. Third, the safety and soundness regulator needs flexibility in setting capital standards. MBA does not mean to imply that today's capital requirements are inappropriate or inadequate in any way. Rather, MBA believes that the regulator needs the tools to respond to changing marketplace conditions. Capital standards are a funda mental tool in this regard. A statute should not unduly tie a regulator's hands. Fourth, a regulator needs adequate enforcement authority to correct any problems that may arise and more importantly, to deter problems in the first place. MBA believes that the banking enforcement tools have proven their effectiveness over the years and supports including such tools for the GSE regulator. Within these four core principles, one issue stands out to MBA as fundamentally important for the mortgage industry, the safety and soundness of GSE programs and activities. The activities of Fannie Mae and Freddie Mac have ramifications throughout the American mortgage market, and indeed throughout domestic and international economies. For these reasons all of their activities must be safe and sound, not just some. We believe that the approval of new programs and activities is fundamentally linked to financial safety and soundness. The safety and soundness regulator is in the best position to evaluate the appropriateness of new or proposed GSE programs. Congress should draw a clear line between the primary and secondary mortgage markets. In no event should the GSE's be permitted to encroach upon the mortgage origination process of use their Government-sponsored benefits to distort the competitive landscape of the primary mortgage market. MBA also believes that it is important that the regulator not micro-manage the GSE's, and that it not unduly constrain the GSE's' ability to innovate in a timely manner to meet marketplace needs. Fannie Mae and Freddie Mac have Government sponsorship so they can assist Americans with their housing needs. Effective safety and soundness oversight ensures that the GSE's are able to meet these needs. MBA strongly supports the affordable housing goals for Fannie Mae and Freddie Mac and endorses HUD's role in setting and enforcing those goals. MBA strongly urges Congress to reform the oversight of Fannie Mae and Freddie Mac in this manner so that they can continue their role in supporting housing, especially affordable housing. Thank you, and I am happy to answer any questions the Committee may have. Chairman SHELBY. Thank you. Ms. Harrison. STATEMENT OF IONA C. HARRISON REALTY EXECUTIVES-MAIN STREET, U.S.A. THE NATIONAL ASSOCIATION OF REALTORS® Ms. HARRISON. Chairman Shelby, Ranking Member Sarbanes, and Members of the Committee, good afternoon. I am Iona Harrison with Realty Executives Main Street USA, a real estate brokerage firm in Upper Marlboro, Maryland. As incoming chair of the National Association of REALTORS® Public Policy Coordinating Committee, thank you for the opportunity to give NAR's views on proposals to enhance regulation of the housing GSE's. Before I begin my statement, let me first thank you, Mr. Chairman, and Senator Allard, if he were here, for efforts on the American Dream Downpayment Act. The Senate Banking Committee unanimously approved this bill with two important amendments that increased the FHA multifamily loan limits in high cost areas. and improved the FHA hybrid ARM program. NAR leads a coalition of supporters who are hopeful that the bill will come to the Senate floor shortly. By adopting this legislation, Congress will send a strong message supporting the Administration on increasing homeownership opportunities. This bill is evidence of the importance this Congress and Administration place on homeownership opportunities. Your GSE reforms can ensure that this commitment remains a high priority in future years. To do so, NAR believes that a new safety and soundness GSE regulator must be truly independent and that program approval and housing mission must remain at HUD. The National Association of REALTORS® supports a credible and vigorous GSE regulator. REALTORS® agree that Fannie Mae and Freddie Mac should have an independent regulator for safety and soundness. We recommend that a new regulatory agency in the Treasury Department should have necessary and sufficient firewalls to ensure its political and operating independence similar to those that currently exist for the OCC and OTS. The Administration proposal to place GSE regulatory oversight and new program approval under the Treasury Department is a major change. REALTORS® expressed opposition to moving GSE housing mission and program approval from HUD when the Administration's plan was first released. Our concern is that housing policy has not been the purview or expertise of the Treasury Department. This has been the purview of HUD. Housing and real estate industries naturally look to HUD to address housing mission, programs and affordable housing goals. HUD should maintain its primacy in these areas. REALTORS® recognize that new programs could have an impact on safety and soundness. Therefore, the new regulator should have a consulting role to HUD on any safety and soundness implications. Program approval must continue at HUD under current standards. Congress deemed the Government Sponsored Enterprise model as an appropriate vehicle to advance homeownership and housing policy as recently as 1992 when it adopted the Federal Housing Enterprises Financial Safety and Soundness Act. Since that time, Congress, homeowners, the housing finance system, and the Nation's economy have all benefited tremendously. The unprecedented expansion of homeownership rates is undeniable testament to the efficiency and liquidity of the secondary mortgage market and the housing sector. Although realtors support a strong regulator, we insist that regulatory reform does not imply and should not result in any weakening of the current housing finance system. Targeted reform for GSE regulation should strengthen our housing finance system. Mr. Chairman, in conclusion, realtors support your deliberate, thoughtful consideration of what measures should be taken to improve GSE oversight. We look forward to working with you and I will be happy to answer any questions you may have. Chairman SHELBY. Thank you. We have a vote on the floor but I thought I would start a few questions. Senator Sarbanes and I |