WASHINGTON — House Financial Services Committee Chairman Jeb Hensarling is calling out Fannie Mae and Freddie Mac's regulator over the mortgage giants' payments to two affordable housing trust funds.
Hensarling sent a letter Friday to Federal Housing Finance Agency Director Mel Watt criticizing his decision to allow Fannie and Freddie's continued support of the Housing Trust Fund and Capital Magnet Fund while the government-sponsored enterprises are suffering financially. Both GSEs this week reported fourth-quarter losses in the billions of dollars, resulting in a request for additional funding from the Treasury.
“Your refusal this month to automatically stop ... [the GSEs'] payments to the Funds as FHFA stated would occur following a GSE draw of new taxpayer funds is unjustifiable,” said Hensarling in the letter. The Texas Republican demanded a written explanation from Watt by Feb. 23.
“Congress must have the confidence that it can rely upon the credibility of the regulators it empowers to faithfully execute their authority and provide accurate written and verbal assurances of their decisions,” Hensarling added. “Otherwise, Congress cannot perform appropriate oversight of those regulators to protect the interest of taxpayers.”
Democratic lawmakers, meanwhile, have praised Watt's decision.
“The Housing Trust Fund and Capital Magnet Fund are much-needed programs that provide funding to increase the supply of affordable housing, and I am pleased that Director Watt has directed Fannie Mae to continue allocating these funds," Rep. Maxine Waters, D-Calif., the ranking member of the House committee, said in a statement Wednesday.
She added that the GSEs' funding draw on the Treasury has more to do with the recent tax reform law, which reduced the value of certain assets held by the mortgage giants.
“This draw from the U.S. Treasury is a direct result of the Republican tax scam and has nothing to do with the financial strength of the GSEs. The GSEs are in strong financial condition and there is simply no reason to arbitrarily suspend funding for affordable housing.”
Fannie Mae and Freddie Mac are required by law to set aside a certain portion of their funding to the two affordable housing programs, unless the enterprises suffer financial woes. During the financial crisis, the FHFA director temporarily suspended payments to the funds beginning in November 2008 through 2014.
Watt recently said the new tax law would only result in a one-time charge for the GSEs and they could continue to pay the trust funds because they had “consistently generated profits” since 2014.
“I do not consider this one-time event to relate to any financial instability on the part of the Enterprise either now or in the future,” Watt wrote in a Feb. 7 letter to the head of Fannie, in justifying payments to the trust funds.
Fannie Mae reported this week a comprehensive $6.7 billion loss in the fourth quarter while Freddie Mac reported a $3.3 billion loss.