Rep. Jeb Hensarling isn’t giving up on housing finance reform.
Warning of a “permanent occupation” of the housing market by the federal government, the House Financial Services Committee chairman on Wednesday pledged that he will “continue to work on a sustainable housing program.”
His efforts have been stymied in the past. The Texas Republican’s committee in 2013 approved legislation to shutter and replace the bailed-out government-sponsored enterprises Fannie Mae and Freddie Mac and scale down the Federal Housing Administration.
But that bill failed to advance in the House amid opposition from the housing industry.
Conservative Republicans were not the only ones to struggle to address the housing finance system. A bipartisan Senate bill to wind down and replace the two mortgage giants also stalled at the committee level in 2014, and few observers expect a resolution during President Obama’s second term.
Nevertheless, Hensarling said he would push reform with Fannie and Freddie and the FHA now engaging in what he termed a “race to the bottom” in offering mortgages with low down payments or other risky features.
His committee held a hearing Wednesday featuring FHA Administrator Julian Castro, who recently announced a cut in the fees charged by the FHA for government-backed insurance on mortgages with low down payments.
Hensarling criticized that decision, asking Castro if “we really want the federal government to be leading the charge into subprime lending.”
The committee last month held a hearing to grill Mel Watt, the Obama-appointed regulator of Fannie and Freddie who has sought to expand access to mortgages through the GSEs, including by backing home loans with down payments as low as 3 percent.
Watt’s agency, the Federal Housing Finance Agency, and the FHA are engaging in the same kind of degrading of lending standards that led to the 2008 crisis, Hensarling said.
Hensarling spoke at a book event featuring conservative housing finance expert Peter Wallison, whose new book Hidden in Plain Sight blames the financial crisis on government efforts to promote homeownership through the GSEs, FHA and other credit programs.
Wallison, a scholar at the American Enterprise Institute think tank, has provoked controversy among experts since his dissent to the 2011 Financial Crisis Inquiry Commission report, in which he blamed government regulators rather than banks for inflating the housing bubble.
“We ought to say: Never again,” Hensarling said, citing Wallison’s history of the crisis.
