FHFA candidate pledges to close racial divide in homeownership
On Thursday, Senate Democrats pressed Sandra Thompson, the president’s nominee to head the Federal Housing Finance Agency, on how to leverage the agency to close the racial gap in homeownership. the property.
Senate Banking Chairman Sherrod Brown, D-Ohio, said Thompson would have a major role to play in closing the gap, as well as preserving affordable housing. The racial gap in homeownership is wider than it was in 1960, eight years before Congress passed landmark housing discrimination legislation, according to the Urban Institute , a think tank.
“At FHFA, she will be able to tackle some of the most pressing issues facing landlords and tenants, and provide stability to our housing finance system,” Brown said. “And over the past week, tragic fires in Philadelphia and the Bronx have reminded us of how far we must go to ensure safe and affordable housing for everyone.”
Thompson, who became acting director in June, said she has previously asked federally backed mortgage companies Fannie Mae and Freddie Mac to examine barriers to homeownership for black communities. and minorities. Government Sponsored Entities (GSEs) have been under FHFA oversight since 2008.
“A house is the greatest asset that most people have. We believe home ownership will go a long way to closing the racial wealth gap,” she said. Thompson is the first black woman named to lead the FHFA.
There was a 30-point gap between white and black homeownership rates in 2017, up from 27 points in 1960, according to the Urban Institute.
Challenges could include a need for better homeownership education or potential biases in the appraisal process to determine home values, Thompson said.
Prior to joining FHFA, Thompson spent 18 years with the Federal Deposit Insurance Corporation. Thompson cited her experience as a Financial Supervisor and Protection Officer at the FDIC during the 2008 financial crisis as formative in how she views housing finance.
“I witnessed firsthand the consequences of irresponsible lending when hundreds of banks across the country were closed and a record number of homes were foreclosed. I saw how borrowers who received loans unsustainable and predatory lending products have been devastated by the recession,” she said.
In response to questions from Democratic Sens. Jon Tester of Montana and Tina Smith of Minnesota, Thompson said access to credit is especially important for black and underserved communities when it comes to buying a home. Fannie Mae has taken steps to start considering rent payments as part of credit scores, she said.
“Qualified borrowers should be able to do that if they can afford a home loan. One of the things that’s happening at Fannie Mae in particular is that a lot of potential landlords are now tenants,” Thompson said. “One of the things that a traditional credit score doesn’t take into consideration would be paying rent.”
The new metrics will allow rent payments to be “considered positively to help improve the credit scoring process,” Thompson said.
Sen. Patrick J. Toomey, R-Pa., the ranking member, criticized the Biden administration’s tactics to promote homeownership among black and minority communities, saying it amounted to “affirmative action on housing.
“I’m concerned the administration is looking to use the FHFA and GSEs to take more risk on taxpayers and expand affirmative action to housing,” Toomey said. “It makes Ms. Thompson’s nomination — despite her vast experience — a referendum on the administration’s radical housing policy.”
Republicans also pressed Thompson on the path to freeing the GSEs from conservatorship, a long-standing political priority for the party. Fannie Mae and Freddie Mac were placed in conservatorship following the 2008 financial crisis.
In response to a question from Sen. Thom Tillis, RN.C., Thompson said the FHFA would defer to Congress on when to release the GSEs from trusteeship.
“In the meantime, we are doing a number of things,” she said, including allowing them to build up capital and encouraging the creditor transfer program.
“We also supervise them in a safe and healthy way and ensure that they fulfill their mission, so that whenever they leave guardianship, they are ready.”
U.S. Senator Elizabeth Warren, (D-Massachusetts) and Senator Sherrod Brown (D-Ohio) wear protective masks as they walk through the Senate Subway at the United States Capitol in Washington, DC on Thursday, February 11, 2021 .