Urban League Will Lobby Against Obama-Backed Housing Bill Unless Changes are Made

Legislation would eliminate homeownership goals for African-Americans

by Frederick H. Lowe

The National Urban League announced on Friday that it will lobby against passage of the Johnson-Crapo housing reform bill unless changes are made in the Senate Banking Committee to the draft legislation to boost affordable housing before the bill is sent this week to the Senate floor.

Sen. Tim Johnson (D., S.D.) is chairman of the Senate Banking Committee and U.S. Sen. Mike Crapo (R., Idaho) is the committee’s ranking Republican member. The bill, which is named after Johnson and Crapo, is officially called the Housing Finance Reform and Taxpayer Protection Act of 2014. The 442-page draft legislation is scheduled to be voted on sometime this week by committee members.

The Obama administration has embraced the draft legislation. Shaun Donovan, Secretary of Housing and Urban Development, said the legislation is Congress’ best chance to achieve reform in the nation’s housing market. Since the subprime crisis, the nation’s housing market is need of a makeover, lawmakers agree.

Fannie Mae and Freddie Mac, the mortgage giants, guarantee the majority of the nation’s mortgages, but the government had to bail them out and the draft legislation calls for their elimination.

Marc Morial, National Urban League president and CEO, wrote in an April 23rd letter to Johnson and Crapo that the legislation “would lead to cost increases, making homeownership unaffordable for many families who already have borne the brunt of the housing crisis as their family wealth has been wiped out through foreclosures and plunging home values.”

Morial added that draft legislation does not promote affordable housing for ownership.

“This is a fundamental issue that cannot be overlooked, underestimated or relegated to negotiation on the Senate floor. It needs to be included—now—as a core provision in any housing or GSE (government-sponsored enterprises, which are Fannie Mae and Freddie Mac),” he said.

If the legislation is approved by the Senate, it could accelerate the already significant post recession decline in home ownership among communities of color and all working and middle-class communities, Morial warned.

“It would wind down Fannie Mac and Freddie Mac and replace them with a new agency, the Federal Mortgage Insurance Corp. (FMIC),” he said. “The new agency would end the federal affordable housing goals that helped boost the percentage of African-American home ownership to a pre-recession all-time high of 50 percent.”

Title I of the draft legislation calls for the elimination of Fannie Mae and Freddie Mac. Six months after the bill’s enactment, FMIC would be created. It would be run by the five-member bipartisan board of directors appointed by the President with the advice and consent of the Senate. The President will appoint the chairperson and vice-chairperson.

The reform bill would require private investors to retain a 10% first-loss position before any government guaranty would kick in.

In a follow-up letter on Friday, April 25, to Johnson and Crapo, Morial said by replacing Fannie Mae and Freddie Mac with a private-capital scheme it would greatly increase the average mortgage cost by at least $1,400 annually to pay for private capital. “Working families cannot afford this bill,” he said.

Latest Housing Data
Morial noted that the most-recent data from the Home Mortgage Disclosure Act clearly demonstrates that families of color have been cut out of the housing market and the situation will only get worse if Johnson-Crapo legislation is enacted.

The HMDA data found that in 2012 there were 1.3 million conventional mortgage loans originated in the United States, but Asian Pacific Islanders received only .2% or 10,611 of the loans. African Americans received 2.3% or 29,405 loans and Hispanics 5.3% or 69,217 loans.

There were 4.9 million refinance loans made in 2012 and Latinos received 76,038, African Americans received 75,785 and Asian American Pacific Islanders received 10,611.

A coalition of African American, Hispanic and Asian groups charged that Johnson-Crapo does not sufficiently address this ongoing inequity–it does not provide a forward and inclusive way for communities to participate in the future housing market even though they will soon comprise the majority of new households in the United States by 2020. The National Urban League is part of the coalition.

Morial maintained that the Johnson-Crapo legislation does not take proactive steps to make sure lenders are serving qualified buyers in all markets, likely causing the housing market to continue to suffer in the future.

“Families of color, expected to represent 7 out of every 10 families formed in the next decade, have home ownership rates that are far below the national average,” he said.

Conventional Mortgages chart