Community leaders and taxpayer groups reconvened before the House Capital Markets Subcommittee last week to discuss the role of government sponsored enterprises as it relates to a bill pending in the subcommittee.

As was the case at last week's hearing, the theme consisted of how low-income and minority homeowners are affected by the GSEs as they attempt to move into the less-than-perfect credit market. Since the introduction of the bill February 29, healthy debate has ensued over whether the government should combine the regulation of Freddie Mac, Fannie Mae and the Federal Home Loan Banks, strip their lines of credit to the U.S. Treasury and require them to disclose a significant amount of data.

Many groups support the legislation, though they do believe it requires more tweaking, while others, including the GSEs, believe that the government is just going to increase the cost of homeownership with the passage of HR 3703.

"They should not be following the market downward into exploitation and predatory lending, but should be leading the market upward to new places of social responsibility," said Reverend Graylan Scott Hagler, senior minister of the Plymouth Congregational United Church of Christ, who supports the passage of the bill to correct what he calls an "unfair and unintended advantage" of the GSEs.

"As you know, the GSEs determine what is a conventional loan and what is considered a subprime loan," added Bruce Marks, chief executive officer of the Neighborhood Assistance Corporation of America, a non-profit housing organization that offers low-cost mortgages to low and moderate-income borrowers. "The GSEs now want to lend on a massive scale to working people who have good but not perfect credit. But instead of recognizing the commitment and creditworthiness of working people, they want to exploit them with subprime loans."

However, GSEs offering subprime loans can be beneficial to the community, said Walter Fauntroy, president of the National Black Leadership Roundtable, who opposes the bill. "Fannie Mae and Freddie Mac will help be a solution to the predatory lending problem," he said, adding that he also supported Congress when it allowed the GSEs to purchase home-equity loans in 1992. "Most of the complaints about Fannie and Freddie entering the subprime markets are not coming from regulatory authorities, but from the predatory lending companies who have been overcharging millions of American families."

Rep. Richard Baker (R., La.), sponsor of the bill and chairman of the committee, is pressing to move the bill out of committee, even though he does not believe it will pass through Congress this legislative session.

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