Menendez Wants Answers on Why Freddie Mac Failed to Meet Goals for Supporting Lending to Low-Income Homebuyers

Menendez Wants Answers on Why Freddie Mac Failed to Meet Goals for Supporting Lending to Low-Income Homebuyers


WASHINGTON, DC - U.S. Senator Bob Menendez, Ranking Member of the Senate Subcommittee on Housing, Transportation and Community Development, today wrote Federal Housing Finance Agency Director Mel Watt concerning preliminary findings in its annual housing report that Freddie Mac failed to meet two goals for lending to low-income homebuyers last year and asked what the agency will do to address these failures.

“…Freddie Mac failed to meet its single-family low- and very low-income home purchase goals for 2014,” Sen. Menendez wrote. “This means that fewer low-income households were able to secure homeownership opportunities in 2014.  At a time when access to mortgage credit remains tight, particularly for those low-income and minority households, it is more important than ever that the GSEs meet the affordable housing goals.” 

Homeownership across the country, including New Jersey, has fallen since peaking in 2004 at 69% and is now at 64.5%, the level it was at in 1994.  Fulfillment of the affordable housing goals are critical for New Jersey households, and throughout the country. According to the National Community Reinvestment Coalition, between 2003 and 2012, close to 650,000 households in New Jersey received home mortgage loans as a result of the affordable housing goals. 

“Homeownership is a critical tool for lower income and minority families to build wealth [and] for many…, their home is their singular source of equity,” Sen. Menendez added. “In communities where lending and access to credit is inadequate, many families rely on the equity in their homes to start a small business, to pay for a child’s higher education, or to finance the care of an elderly parent.  Affordable housing goals continue to play a crucial role in facilitating access to credit for underserved markets, and I urge you to hold the GSEs accountable for any failures to meet such goals.” 

The full letter is below. 

November 18, 2015

The Honorable Melvin Watt
Director
Federal Housing Finance Agency
400 7th Street, SW
Washington, DC 20024

Dear Director Watt:

I write today regarding concerns about the preliminary findings on affordable housing goals reported in the Federal Housing and Finance Agency’s (FHFA) 2015 Annual Housing Report.  As identified in the report, the Federal Home Loan Mortgage Corporation (Freddie Mac) failed to meet its single-family low-income and very low-income home purchase goals in 2014.[1] 

As you know, the Housing and Economic Recovery Act of 2008 set new affordable housing goals for the government-sponsored enterprises (GSEs) to invest in both single-family and multifamily housing for low- and very low-income households.[2]  Under the current requirements, the GSEs are required to focus a certain amount of their business on certain types of borrowers, a requirement established by Congress to facilitate the financing of affordable housing for low- and moderate-income borrowers.

According to the report, Freddie Mac failed to meet its single-family low- and very low-income home purchase goals for 2014.  This means that fewer low-income households were able to secure homeownership opportunities in 2014.  At a time when access to mortgage credit remains tight, particularly for those low-income and minority households, it is more important than ever that the GSEs meet the affordable housing goals. 

In 2014, the homeownership rate for households that fell below median income was less than 50 percent, whereas in the same time period, the homeownership rate for households above median income neared 80 percent.[3] Perhaps even more troubling is the sustained gap in homeownership rates between whites, blacks and Hispanics.  At the end of the third quarter of 2015, homeownership among whites, at close to 72 percent, far surpassed the rate of homeownership among blacks, just over 42 percent, and Hispanics, just over 46 percent.[4]  Furthermore, black and Hispanic borrowers are 2.7 and 2.1 times more likely, respectively, to be denied for a conventional mortgage than white applicants.[5]  All of these indicators emphasize the urgency in ensuring the GSEs meet their affordable housing goals.

Homeownership is a critical tool for lower income and minority families to build wealth.  In addition to providing shelter for a family, for many low-income and minority households, their home is their singular source of equity.  In communities where lending and access to credit is inadequate, many families rely on the equity in their homes to start a small business, to pay for a child’s higher education, or to finance the care of an elderly parent.  Affordable housing goals continue to play a crucial role in facilitating access to credit for underserved markets, and I urge you to hold the GSEs accountable for any failures to meet such goals. 

With that in mind, please provide detailed responses to the following questions:

    1. What factors, circumstances, or policy decisions led to Freddie Mac falling short of its affordable housing goals in 2014?
    2. Should FHFA make a final determination that Freddie Mac failed to meet its affordable housing goals for 2014, what remedial actions will FHFA take to address the deficiency?
    3. Should FHFA make a final determination that Freddie Mac failed to meet its affordable housing goals for 2014, what steps will the agency take to ensure that Freddie Mac complies with affordable housing goals in the future?


[1] Federal Housing Finance Agency, Annual Housing Report 2015 (October 30, 2015), available at http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/Annual_Housing_Report_2015.pdf.

[2] Housing and Economic Recovery Act of 2008, Pub. L. No. 110-289, 122 Stat. 2654.

[3] U.S. Census Bureau, Residential Vacancies and Homeownership in the Third Quarter 2015 (October 27, 2015), available at http://www.census.gov/housing/hvs/files/currenthvspress.pdf.

[4] U.S. Census Bureau, Housing Vacancies and Homeownership (CPS/HVS), Table 16, available http://www.census.gov/housing/hvs/data/histtabs.html.

[5] Less Money, More Problems: Black and Hispanic Access to Housing, Zillow (February 12, 2015), available at http://www.zillow.com/research/black-hispanic-access-to-housing-8896/.

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