November 07, 2013


WASHINGTON – U.S. Senator Mike Crapo (R-Idaho), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing held to examine the essential elements to provide affordable options for housing:
"Thank you, Mr. Chairman. 
"Today, we continue our important work examining essential elements of a new housing finance system.  Thank you to our witnesses for appearing today to present their thoughts on this important topic.
"For millions of Americans across the country, homeownership provides a source of security and a sign of responsibility.  There are undeniable benefits derived from homeownership for both the families who buy and the broader community, as long as the purchase of that home is achieved through responsible, sustainable means.
"Five years after the financial crisis, affordability is still a major concern for prospective homeowners.  As we address this important issue, we must not return to the flawed policies of the past.
"Several prominent economists have criticized the affordable housing policies of the 1990s and early 2000s as a significant contributor to the financial crisis.  They argue mandatory affordable housing goals forced Fannie Mae and Freddie Mac to lower underwriting standards, reach into the subprime market and ultimately take on more unsustainable risk.
"During the height of the housing bubble, Fannie and Freddie began acting like highly-leveraged hedge funds, purchasing as investments nearly 40 percent of private label subprime securities.  These combined actions harmed borrowers, homeowners and taxpayers through the creation of unsustainable mortgages.
"S. 1217 aims to strike a delicate balance between making homes more affordable and protecting the American taxpayer.  In exchange for a repeal of the flawed affordable housing goals the government-sponsored enterprises (GSE) were previously required to meet, the new framework would provide funding to expand access to affordable homeownership and rental housing.
"Funds would be allocated to two existing programs—the National Housing Trust Fund and the Capital Magnet Fund.  These funds would provide grants and other aid for states, housing entities and other non-profits to ensure broad access to affordable housing options.
"I have heard a lot of positive feedback about the benefits of localized affordable housing policy and how it can offer more flexibility for tailored approaches. However, this new model still raises many questions.
"First, how would these funds interact with the myriad of other federal affordable housing options already offered through HUD, Federal Home Loan Banks, the USDA and certain tax incentives?  According to a recent Government Accountability Office (GAO) report, federal housing assistance is fragmented across twenty different entities administering 160 programs, receiving tens of billions of dollars each year in federal funding.   The GAO report recommends several actions that can be taken to eliminate duplication and increase efficiency among these programs.
"Second, is the 5-10 basis point charge on guaranteed securities envisioned in S. 1217 appropriate to capitalize these funds?  Using today’s secondary market size, many estimate that these funds would receive $2.5 billion to $5 billion per year in funding.  To put that in perspective, the allocation to these funds would be roughly 10 percent the size of HUD’s FY 2012 budget.  How do we make sure the funds are accountable and transparent to the American taxpayers and Congress?
"As we debate ways to increase affordability, it is imperative that we strive to make our policies responsible, accountable and efficient.
"We have an opportunity to achieve much-needed reform to our housing finance system. In doing so, we must find a way to promote responsible housing policies without placing the American taxpayer at risk. The American taxpayer cannot be exposed to another “GSE-like” bailout as a result of deeply flawed policies.
"Thank you, Mr. Chairman."