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Fannie Mae, Freddie Mac Reform Must Serve the Whole Market

Wednesday, March 12, 2014

Senate Banking Committee Chairman Tim Johnson and Ranking Member Senator Mike Crapo announced yesterday a bipartisan agreement on a plan to reform the housing finance system. The proposal has yet to be fully unveiled.

"We appreciate Senators Johnson and Crapo's attention to this critically important issue," said Mike Calhoun, president of the Center for Responsible Lending. "The mortgage market is a $10 trillion industry and any changes to it will resonate through the entire economy. This is why any change must be considered carefully."

"Overhaul of the housing finance system must ensure access to affordable and responsible mortgage credit for all consumers," continued Calhoun. "If legislation fixes what was broken and builds on what works, we can create a housing finance system that will support economic growth and provide loans to creditworthy families in good times as well as bad. We will be looking closely at the Johnson-Crapo proposal to see how it measures up against these goals."

CRL has proposed replacing Fannie Mae and Freddie Mac with a mutually owned entity that banks would invest in. This, CRL experts said, would properly incentivize banks to make prudent, well-underwritten loans. It's also the current structure used by the Federal Home Loan Banks which served the market well through the crisis.

The Center for Responsible Lending is a research and advocacy organization focused on consumer lending. In December 2006, CRL published Losing Ground, the first comprehensive, nationwide review of millions of subprime mortgages and predicted the subprime mortgage crisis that began in 2008. In 2011, CRL published Lost Ground, an analysis of 27 million mortgages that detailed the effects of the subprime mortgage crisis, especially as it pertains to homeowners of color.

For more information, contact Catherine An at 202-349-1878 or