Key Vote “No” Federal Housing Finance Regulatory Reform Act of 2008

On behalf of hundreds of thousands of FreedomWorks members nationwide, I urge you to VOTE “NO” on the Federal Housing Finance Regulatory Reform Act of 2008.  On the way to doing nothing to address the fundamental problem in the housing market, this bill creates a new $300 billion taxpayer liability, creates a trust fund in perpetuity outside of budgetary oversights for political community groups, and greatly expands the Federal Housing Administration, perhaps to the breaking point.

The legislation allows mortgage lenders, including Countrywide Financial, to cherry-pick the worst performing and riskiest loans in their portfolios, turning them over to the FHA and shifting 100 percent of the new liability to taxpayers all over the country who will have to pick up the tab for the few states where foreclosures are concentrated.  Because the legislation allows mortgage lenders to shift their highest risk loans to the FHA, CBO estimates that 35 percent of the loans will eventually default even after the balances are reset through the program.     

GSE reform is critical to sound housing policy, but should not have to come at the price of a bailout bill for banks on the backs of taxpayers.  The new tax in this bill actually undermines the GSEs, requiring them to pay 4.2 cents for every $100 in mortgages purchased or securitized every year.   

The bill is the wrong answer to the housing crisis.  The immediate new spending and taxpayer risks outweigh the benefits of this legislation.  It rewards the least prudent borrowers and their lenders and puts taxpayers on the hook for the riskiest loans.

As Housing Commissioner Montgomery noted, “But some in Congress are advancing legislation that, while well intentioned, could be problematic for the economy and the country.  Some of the proposed congressional actions could actually weaken the FHA and endanger the housing market by turning FHA into a less stable, less solvent, more bureaucratic entity.”

We will count your vote on the Federal Housing Finance Regulatory Reform Act of 2008 as a KEY VOTE when calculating the FreedomWorks Economic Scorecard for 2008. The FreedomWorks Economic Scorecard is used to determine eligibility for the Jefferson Award, which recognizes members of Congress with voting records that support economic freedom.