Civil Rights Groups Oppose Fannie, Freddie Reform Plan

A coalition of civil rights and other advocacy groups has taken a stand against proposed federal legislation that would revamp the U.S. housing finance system, specifically, winding down government-controlled Fannie Mae and Freddie Mac.

In a joint statement, the groups said they have "serious concerns" that the legislation, as proposed, wouldn't create a system that was safe and could provide affordable mortgages for all creditworthy borrowers, including minorities and people with modest incomes. Rather, the groups charged, the proposal would make mortgages more expensive and less available to those populations.

'Legislation widens existing wealth gap'
"As drafted, this proposal makes it extremely difficult for communities of color to participate in the housing market today and in the future," said the groups in the joint statement. The statement continued, "While expressing appreciation for the Senate's bipartisan efforts, the groups underlined their concern that the legislation would widen the existing wealth gap and lock out the very borrowers the market needs to operate in a healthy manner. Much more needs to be done, the groups agreed."

The coalition includes seven groups: the Leadership Conference on Civil and Human Rights, National Association for the Advancement of Colored People (NAACP), National Coalition for Asian Pacific American Community Development, National Council of La Raza, National Fair Housing Alliance, National Urban League and Center for Responsible Lending.

Proposed outline for reform

Earlier this month, Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Senator Mike Crapo (R-Idaho) released a statement that outlined their proposal.

Included in the proposal from the Senate Banking Committee were plans to:

  • Wind down Fannie Mae and Freddie Mac
  • Transfer certain functions to a Federal Mortgage Insurance Corp. (FMIC), modeled on the Federal Deposit Insurance Corp. (FDIC)
  • Require 10 percent private capital in mortgage originations
  • Create a securitization platform that would issue a standardized FMIC-wrapped security
  • Permit private-label mortgage securities to be issued in a way that would encourage standardization and improved market liquidity
  • Require underwriting standards that mirror the qualified mortgage (QM) definition
  • Require a 5 percent down payment for homebuyers with a 3.5 percent exception for first-time home purchasers
  • "Eliminate affordable housing goals and establish transparent and accountable housing-related funds that would focus on ensuring there is sufficient decent housing available."

The civil rights groups said today's mortgage market almost entirely excludes Latinos, African-Americans, Asian American Pacific Islanders and other minorities and the proposal doesn't provide a way for them to participate in the future housing finance market.

"The bill lacks provisions to ensure that the housing finance system is fair and non-discriminatory. Moreover, the changes proposed in the reform bill may disadvantage smaller and rural lenders that serve already under-serviced portions of the population," the groups said.

The original article: Civil rights groups oppose Fannie, Freddie reform plan appeared on HSH.com.

Boost your 2014 returns with The Motley Fool's top stock
There’s a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Additional mortgage articles can found on HSH.com.

Which closing costs can I negotiate?

MIP or PMI? The choice grows more difficult

The evolution of FHA mortgage rates




Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 19, 2014, at 1:49 PM, thiagorulez wrote:

    This kind of thing makes me wonder where civil rights attorney's usually stand on these issues? Are they like mercenaries, or do they each have their own stance. Could some of them be part of these civil rights groups? Thiago | http://www.obrienlawpgh.com/

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2902394, ~/Articles/ArticleHandler.aspx, 10/31/2014 4:05:46 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement