ABA, Housing Groups: GSE Structural Reforms Must Precede Recapitalization

As debates continue to swirl about recapitalizing the housing GSEs Fannie Mae and Freddie Mac, the American Bankers Association and several other housing and financial groups urged Treasury Secretary Steven Mnuchin and Federal Housing Finance Agency Director Mel Watt not to give in to advocates for rebuilding Fannie’s and Freddie’s capital cushions without structural reform.

“Housing finance reform must go through Congress to create stable, sustainable housing markets that best serve our nation’s communities,” the groups said. “We…believe the debate over recapitalizing a broken system distracts from the critical structural issues that Congress must address to ensure that the federally supported secondary market serves key, bipartisan objectives.”

The groups cited a 2016 Congressional Budget Office finding that allowing Fannie and Freddie to create a capital cushion “simply converts a potential future draw on federal funds into an immediate draw and such an action would effectively increase the size of taxpayer exposure to future losses.” They urged all parties to focus on long-term solutions to the nearly-decade-long conservatorships instead of taking short-term actions that could hinder GSE reforms.