Remember that I told you that I'd written my congressional representatives. I pointed out that there was a very serious crisis in the offing and that I had some constructive suggestions as to how to get in front of the whole mess. I really focused on the leverage of FNM and FHR with emphasis on a mild increase in foreclosures and that effect on their meager capitalization. Well guess what, I found a response. Here it is:
September 6, 2007
Dear Harry,
Thank you for contacting me about the regulation of the federal housing finance system. I appreciate hearing from you on this important issue.
In recent years, information has surfaced about mismanagement and financial irregularities at Fannie Mae and Freddie Mac, two government sponsored enterprises (GSEs) that hold a large percentage of America's outstanding mortgages. In response, Congress has considered several pieces of legislation to strengthen accounting practices and regulation of the GSEs and the overall federal housing finance system.
As you may know, Representative Barney Frank introduced H.R.1427, the Federal Housing Finance Reform Act of 2007, on March 9, 2007. This bill would create a new federal regulator, the Federal Housing Finance Agency, to oversee the GSEs and ensure that they accomplish their mission of creating a secondary mortgage market that expands the flow of mortgage money in the American economy in order to better meet the nation's housing needs. As a member of the House Financial Services Committee, I firmly believe and understand that a new regulator is necessary to ensure the safety and soundness of these enterprises.
The bill would also create an "affordable housing fund" by taking a percentage of the GSEs' total mortgage portfolios to pay for housing grants and projects. While I support improved access to affordable housing, I believe this is a damaging course of action. The additional cost to the GSEs will inevitably be passed along to consumers in the form of higher fees, thereby raising the costs of purchasing a home or refinancing an existing mortgage. In other words, the fund could effectively result in a tax on middle- to lower-income American homebuyers. Consequently, I opposed the bill when it came to a vote on May 22, 2007.
The Federal Housing Finance Reform Act is now awaiting consideration by the Senate. I believe establishing a world-class regulator for the GSEs is critical and it is my hope that concerns regarding the affordable housing fund will be resolved before H.R. 1427 returns to the House for a final vote. I can assure you that I will continue working to strengthen our housing finance system, to help all Americans realize the dream of home ownership.
Once again, thank you for contacting me. Please keep in touch.
Sincerely,
Michele Bachmann
Member of Congress
Isn't it grand when our representatives are so understanding of what's going on around them? I was VERY specific on what was happening as it relates to, 1. GSE leverage and 2. the folly related to underwriting based (solely) on expected LTV - no mention of either. I also like the part about a possible tax increase to ordinary Americans. What, do you suppose, will happen to our already burgeoning federal deficit and who will pay for it?
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