May 22, 2018

U.S. Senate
Washington, D.C. 20510

Dear Senator,

As a member of the Senate Committee on Banking, Housing, and Urban Affairs, you will tomorrow hold a hearing on “Ten Years of Conservatorship: The Status of the Housing Finance System.” On behalf of the more than one million members and supporters of the Council for Citizens Against Government Waste (CCAGW) I respectfully urge you to take the safety and soundness of the taxpayers into account as you explore issues related to the future of these mortgage giants and government-sponsored enterprises (GSEs) when you hear testimony from the GSEs’ regulator, Federal Housing Finance Agency (FHFA) Director Mel Watt.

On September 6, 2008, Fannie Mae and Freddie Mac were placed into federal conservatorship in the wake of the housing market crash, in which they had a major causative role. More than a decade later, neither the GSEs, FHFA, nor Congress have offered any viable plans to unwind these entities and release them from taxpayer-backed financial foster care. More alarmingly, there are no indications that, should Congress manage to create a path to release them from conservatorship, Fannie and Freddie will be constrained to their original mission of secondary mortgage market securitization. In fact, their recent activities indicate that they will continue to overspend, overreach, and encroach into the private sector, much as they did before the 2008 meltdown.

We urge you to ask Director Watt for a full accounting and explanation of the extravagant costs associated with the construction and build out of Fannie Mae’s new $700 million headquarters. FHFA’s Office of Inspector General cited weak oversight of this project. Taxpayers also deserve a full explanation of the enterprises’ reported lobbying activities (which are prohibited by law), how many lobbyists they employ directly or as outside contractors, and the costs associated with these activities. And taxpayers deserve clarity on the full range of activities the enterprises are undertaking that stray outside their original charter and compete directly with the private sector. For example, it has been reported that Freddie Mac has begun issuing lines of credit to nonbanks that issue mortgages, offering no transparency on the program, and launched IMAGIN, a pilot program that appears to compete directly with private mortgage insurers. This is yet another activity that is not in the GSEs’ charters, and which was developed and initiated with little or no explanation.       

Thank you for your consideration of our views on FHFA and GSE reform. If you have any questions, please feel free to contact me at (202) 467-5300.

Sincerely,

Tom Schatz
President, CCAGW

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