NFHA and Advocates Urge the Federal Housing Finance Agency to Adopt a Regulatory Capital Framework That Promotes Racial Equity

FOR IMMEDIATE RELEASE

November 23, 2021

Contact: Izzy Woodruff | 202-898-1661 | IWoodruff@nationalfairhousing.org

NFHA and Advocates Urge the Federal Housing Finance Agency to Adopt a Regulatory Capital Framework That Promotes Racial Equity

Washington, D.C. — The National Fair Housing Alliance (“NFHA”) and leading civil rights, housing policy, and consumer advocates have submitted a comment letter to the Federal Housing Finance Agency (“FHFA”) in response to its Request for Comment on a Notice of Proposed Rulemaking (“Proposed Rule”) regarding the Enterprise Regulatory Capital Framework for Fannie Mae and Freddie Mac (the “Government-Sponsored Enterprises” or the “GSEs”).

“We applaud FHFA’s direction in this Proposed Rule. The GSEs’ Regulatory Capital Framework is critically important because it affects the pricing and availability of mortgage credit at a time when the Black/White homeownership gap is as wide as it was prior to passage of the Fair Housing Act,” said Nikitra Bailey, NFHA’s Senior Vice President of Public Policy. “Today, families of color lag far behind wealthier and White communities that were advantaged by lending discrimination supported by our federal government’s lengthy history of mortgage policies and private actions that led to vast disparities in homeownership and wealth. The GSEs must build out their important public mission, including increasing credit access for borrowers of color and other protected groups. The GSEs should also eliminate LLPAs, which have a disparate impact on borrowers of color. LLPAs must be replaced with less discriminatory alternatives that do not unfairly increase the cost of mortgage loans for communities of color.”

FHFA needs to act swiftly to move the GSEs toward greater equity as the Federal Reserve Board’s $40 billion per month in agency mortgage-backed securities is exacerbating racial wealth and homeownership gaps. The Federal Reserve’s actions have helped existing homeowners to see their home equity grow by more than $2.9 trillion dollars since the second quarter of 2020. Additionally, the Federal Reserve’s actions to mitigate the economic impacts of COVID-19 resulted in lowering the federal funds rate, which helped mortgage interest rates remain at historic lows and stimulated home purchasing and refinancing. However, Federal Reserve researchers found that these benefits did not benefit the whole housing market equally. The analysis showed that the median Black and Latino mortgage borrowers accumulated significantly less equity. Moreover, only six percent of Black borrowers and nine percent of Latino borrowers refinanced, as compared to 12 percent of White borrowers. 

Given these continued disparities in the housing finance market and the statutory mandates, FHFA’s Proposed Rule should not allow the GSEs to emerge from conservatorship with the existing low levels of loan purchases to borrowers of color, even though the Federal Reserve’s support caused the GSEs’ balance sheets to expand considerably. Ensuring a fair and equitable national housing finance market is consistent with FHFA’s obligation to Affirmatively Further Fair Housing and also makes good business sense. The demographics of the nation are undergoing a dramatic shift, and the majority of new households formed over the next decade will be households of color. In other words, future housing demand will be driven by people of color. A robust housing market, both for new homebuyers seeking to purchase homes and for existing homeowners seeking to refinance or sell their homes, cannot exist in the absence of access to mortgage credit on fair and equitable terms for all creditworthy borrowers.”

With respect to the rule, the advocates believe that FHFA should do the following: 

• Ensure that the rule is consistent with the GSEs’ mandate to serve the whole of the market, including communities of color;
• Review the rule for fair lending risk and ensure that the rule promotes equitable treatment for borrowers of color and other protected groups;
• Conduct additional analysis to determine whether the total amount of capital required and the prescribed leverage buffer amount can be lowered further to increase access to credit; and
• Adopt the proposed changes to credit risk transfer transactions, which provide appropriate incentives for the transfer of risk and minimizes exposure to the American taxpayer.

The advocate letter was issued jointly by the following organizations:

• Asian Real Estate Association of America
• Color of Change
• Leadership Conference on Civil and Human Rights
• Long Island Housing Services, Inc.
• NAACP
• National Association for Latino Community Asset Builders
• National Association of Real Estate Brokers
• National CAPACD
• National Consumer Law Center (on behalf of its low-income clients)
• National Fair Housing Alliance
• National Housing Law Project
• National Urban League
• PolicyLink
• Prosperity Now

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The National Fair Housing Alliance (NFHA) is the country’s only national civil rights organization dedicated solely to eliminating all forms of housing and lending discrimination and ensuring equal opportunities for all people. As the trade association for over 200 fair housing and justice-centered organizations and individuals throughout the U.S. and its territories, NFHA works to dismantle longstanding barriers to equity and build diverse, inclusive, well-resourced communities.