May 23, 2018

Brown Opening Statement At Banking Committee Hearing On FHFA

WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH) – ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – released the following opening statement at today’s hearing entitled “Ten Years of Conservatorship: The Status of the Housing Finance System.”

Sen. Brown’s remarks, as prepared for delivery, follow:


Thank you, Chairman Crapo.

Director Watt, welcome back.

I want to thank the Chairman for calling this hearing to continue the Committee’s discussion of the current status and future of our housing finance system.

At the center of our discussion today are millions of American families – homeowners, aspiring homeowners, and renters. Each one has a different income and different needs. But all of them want a safe, affordable place to call home.

The secondary mortgage market was developed to give borrowers in each of our states access to that opportunity.

But leading up to the crisis, as new private entities entered the secondary market, the secondary market tail started wagging the dog.

Lenders churned out loans to meet the demands of risk-seeking investors, and homeowners suffered the consequences.

Communities in Ohio and across the country are still dealing with the foreclosures and blight that resulted from the housing crisis.

There have been significant changes in the G-S-Es’ activities since the crisis.

They have reduced their portfolios and ended investments in the high-risk, private-label securities that drove losses to taxpayers. 

The G-S-Es have undergone additional changes since you last appeared before this Committee.

Last year, I expressed my concern that, under the terms of an agreement with Treasury, the G-S-Es’ capital cushion could soon go to zero, putting taxpayers and the G-S-Es at unnecessary risk.

I applaud your work with Treasury Secretary Mnuchin to allow each Enterprise to retain a small capital buffer to absorb quarterly accounting fluctuations.

This small but meaningful change provided certainty to mortgage investors and the Enterprises, and ultimately homeowners.

And, in January, the G-S-Es began implementing plans to meet their “duty to serve” underserved markets. These steps are important to many American families. 

But we also need to take a close look at what has not changed. 

Far too many creditworthy borrowers still struggle to access sustainable credit in the mortgage market, particularly in communities of color.

In February, the Center for Investigative Reporting released data showing that people of color were far more likely – in some cases more than five times as likely – to be denied a conventional mortgage in 61 metropolitan areas.

And just yesterday, the House of Representatives passed legislation that will make it harder to detect and protect against violations of fair housing laws – particularly “reverse redlining,” which devastated borrowers and communities during the crisis.

Meanwhile, borrowers in Ohio are still unable to access low-balance loans to revitalize properties and neighborhoods throughout the state, and more than one quarter of renters are paying more than half of their income in rent.

Today’s discussion of the secondary market is, at its core, a discussion about access.

Going forward, decisions made in this Committee will determine whether borrowers across each of our states will continue to have access to a 30-year fixed-rate mortgage, and whether our community bankers will still be able to compete with the largest lenders to serve their customers.

Today, I hope we can explore the elements of the secondary market that are essential to facilitate affordable homeownership and should be preserved, and explore new ways to address remaining problems and unmet housing needs. 

I look forward to hearing from Director Watt about the work that F-H-F-A and the G-S-Es are doing to meet the needs of all lenders and borrowers, and what Congress can do to make our system work better for American households.

Thank you.