Serving underserved communities and ensuring that all Americans have a pathway to homeownership, the cornerstone of financial security; the White House has laid out ambitious principles for housing reform which at their core aim to level the playing field for all Americans.

Recently, the White House called on Congress to take up housing reform that at its core tackles “affordability and access to credit, especially for middle-income Americans and minorities.” This is an important shift for the Administration. Their intentions are good and I commend them.


However, if the Administration and Treasury were truly serious about creating an environment that supports homeownership for underserved communities, they would be realistic when setting their policy goals. Because housing reform that truly encompasses these goals is not on the horizon and is unlikely to happen anytime soon.

Until the day comes when Congress and the Administration can work together to pass housing reform that protects our nation while serving its people, we must use the tools at our disposal now to accomplish what Treasury has dictated as its priority.

And it is possible to tackle this right now. It’s in the hands of this Administration to allow more credit to be open to underserved communities. The best chance to meet these goals is to allow the Fannie Mae and Freddie Mac, whose charters require them to serve underserved communities, to build up their capital.

Now, that the Administration cares so deeply about affordability is a remarkable turn of events. Indeed, homeownership rates amongst minority communities continue to fall and minority applicants are turned away far more frequently than their white counterparts.

Consider that more than 25 percent of loan applications by black applicants are denied, compared with 10 percent of their white counterparts. Additionally, nearly three in four white Americans own their homes, compared to less than half of black and Hispanic Americans.

Allowing the GSEs to retain capital, gives them the means and independence to strike a prudent balance of risk with the availability of credit, particularly to less affluent, and underserved, borrowers. Weak or non-existent capital causes institutions to constrict their credit standards and make credit available only to more affluent borrowers in order to avoid risk.

The two largest mortgage credit intermediaries in the U.S. – Fannie and Freddie – find themselves in the latter position, meaning they make less mortgage credit available for lower and more moderate income borrowers seeking to become homeowners because their lack of capital constricts their ability to make otherwise prudent credit decisions. Allowing them to build up their capital means they can serve a wider variety of potential homeowners. It is clear that we need more private capital to open the mortgage credit box to homebuyers who are not getting loans now.

In addition to caring about opening credit to underserved communities and housing affordability, it is also important to care about taxpayers. For years, “noisy advocates” like me and many from the civil rights and advocacy community have continued to call for safety and soundness at the GSE’s so that we insulate them from a potential draw.

Even FHFA Director Mel Watt sounded this alarm earlier in the year and spoke on the need to let the GSE’s collect reserves that will help protect taxpayers, should another economic crisis hit. In his speech at the Bipartisan Policy Council, he highlighted that there are serious unintended consequences with the lack of capital carried by the GSEs. It has created a system of uncertainty and limbo, which would ultimately rest on the shoulders of the American taxpayer.

Because if there's a draw, and Treasury's writing a check – regardless of what it is “technically” - a draw will be seen as another bailout and affordable housing will take a hit. And this would happen because of this Administration’s failure to allow the GSE’s to recapitalize and help protect the taxpayer.

If the Obama Administration is truly serious about instituting change in the housing market that ensures affordability for all, while protecting the American taxpayer, it must realize that a gridlocked Congress will not act anytime soon. It must do everything in its power to ensure that as part of its legacy, it provides as many Americans the opportunity to cement their piece of the American dream: homeownership.

Glen S. Corso is the Executive Director of the Community Mortgage Lenders of America, the only trade association solely dedicated to advocating for independent, community-based residential mortgage lenders.

The views expressed by authors are their own and not the views of The Hill.