I want to call attention to a news story from last week that has received very little attention. In a Bloomberg article by Clea Benson and Alexis Leondis entitled “Lending to Minorities Declines to a 14-Year Low in U.S.” http://www.bloomberg.com/news/2014-09-24/lending-to-minorities-declines-to-a-14-year-low-in-u-s-.html. The sad reality is that this is yet another result of holding Fannie and Freddie hostage for the last six years. In what is perhaps the cruelest irony in our struggle the very segment of our population that bore the brunt of the predatory lending practices that private capital unleashed on the housing market has been forced out of the housing market for 6 years. Millions of low to moderate income Americans who would have qualified for a mortgage prior to the sub-prime boom years are being denied the ability to purchase a home. In the years leading up to the boom and bust people with the very same credit scores that are being denied today were able to buy homes. Due to Fannie and Freddies superb underwriting the default rate was no higher than the broader group.
Reports like this have become a sad, recurring theme since the housing collapse in 2008. We reported on this back on July 15th when we boldly stated “The other article I want to call attention to is the Bloomberg piece by Clea Benson entitled “Dive in Minority Lending Puts Pressure on Fannie-Freddie.” I don’t think this requires much analysis, but I will say that its become apparent that the elimination of Fannie and Freddie would exacerbate this problem ten-fold. Clea points out “The numbers are stark: Blacks are about 13 percent of the U.S. population, but represented about 5 percent of conventional mortgage borrowers in 2001, before the housing bubble, according to data collected by federal regulators. By 2012, they were only 2 percent. Over the same period, Hispanics dropped from almost 8 percent of such borrowers to 4.5 percent, even as their share of the population grew to 17 percent.The disparities are set to grow. By 2025, minorities could make up almost half of the population between the ages of 24 and 34, when most first-time buyers enter the market, according to a June report by Harvard University’s Joint Center on Housing Studies.” The numbers don’t lie; the elimination of Fannie and Freddie will lead to a permanent apartheid type American housing market. ”
In closing, I just would like to say that a lot of bold claims regarding how things will transpire have been made on all sides of our cause.I predicted that housing finance reforms stood no chance of passage. I stated that the government had no defense for the third amendment sweep, and they have proved me right at every turn. Finally, I called attention to the huge role that Fannie and Freddie play in our economy. The latter of which seems to get the least coverage though just may prove to be our biggest asset. As people were forced to examine what life would be like minus Fannie and Freddie, they have realized the grim reality many would face. I am not referring to the richest Americans but rather the most vulnerable Americans. Those Americans who can not afford high-priced lobbyists to work on their behalf. Those Americans who have paid a high price for the greed that drove private capital to utterly destroy our housing market and almost created another great depression.The elimination of Fannie Mae and Freddie Mac would have disastrous consequences for the U.S. economy and would wipe out decades of progress that has been made to ensure that the dream of home ownership is accessible to all Americans. The elimination of Fannie and Freddie would cause the destruction of decades of hard-won progress that ensure Americas housing market is accessible to all Americans. Keep the Faith!