While it may be true that the Government Sponsored Enterprises like Freddie Mac need improved regulatory oversight, the current version of the Senate Federal Housing Enterprise Regulatory Reform Act goes way too far. In particular, the provisions limiting the portfolios of the Government Sponsored Enterprises could do great damage to affordable housing.
Since their inception, these enterprises have proven themselves to be a valuable resource in providing and promoting home financing. They have also been an important player in affordable housing, using their expertise and scale to help millions of low and moderate income Americans to purchase a home or find rental housing. In doing so, the enterprises have helped strengthen communities and create jobs, spurring economic growth.
The success of the Government Sponsored Enterprises has led to growth and complexity that has invited increased scrutiny and calls for regulatory reform. There is little dispute that oversight of the enterprises needs a fresh look. But the regulatory zeal threatens to go too far. The Senate Federal Housing Enterprise Regulatory Reform Act includes a provision limiting portfolio size. This provision would essentially require Freddie Mac to drastically reduce its mortgage portfolio, and potentially its affordable housing tax credit portfolio as well. The resulting damage to the multifamily housing market and the affordable housing tax credit market could be severe, since mortgages for these properties depend on the Government Sponsored Enterprises providing financing through mortgage purchases. A reduction in the their mortgage purchases, therefore, would raise the cost of capital for developers and owners and making infeasible development of thousands of apartment homes. A reduction in tax credit equity financing would have a similar effect.
As a leading provider of capital to the affordable housing industry, MMA Financial knows first-hand how important Government Sponsored Enterprises are to the market. MMA Financial works with Freddie Mac, Fannie Mae, the Federal Housing Authority, pension funds, banks and other institutional capital sources to create financing packages tailored to the needs of each specific market, borrower and property. With our capital partners, we finance affordable and market rate housing for families and seniors across the country and here in Maine.
But MMA Financial’s ability to meet the needs of affordable housing developers will be severely limited if Congress forces Freddie Mac out as an investor in multi-family mortgages and tax credit equity.
It seems ironic that our country’s housing finance system is the envy of the world, but we are in danger of reducing its effectiveness in the name of “reform.” What began as a serious debate about regulatory reform of these enterprises has ballooned into a bill that undermines their ability to do one of the things they do best: promoting affordable housing.
Congress must tread carefully. Government Sponsored Enterprises are vital to affordable housing. It would be a disastrous mistake to unnecessarily restrict their ability to expand homeownership and affordable housing multi-family rental housing. If policy makers want to level the playing field, that is fine, but they should not “shrink the box” in which the GSEs can operate. The country cannot afford the consequences.
Jenny Netzer is the executive vice president of MMA Financial, and is responsible for leading the Affordable Housing Tax Credit business unit, which creates and manages investments in tax credit properties for institutional investors.
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