GOP Pushes Back on Race-Based Housing Subsidies

Senate Republicans have pushed back against the Federal Housing Finance Agency’s (FHFA) move to grant race-based housing subsidies.

Senate Banking Committee Republicans, led by Sen. Thom Tillis (R-NC), sent a letter to FHFA Director Sandra Thompson regarding Fannie Mae and Freddie Mac’s Equitable Housing Finance Plans developed at the direction of the FHFA.

The plans would establish race-based housing subsidies that would aim to “address racial and ethnic disparities in homeownership and wealth that have persisted for generations.”

The Senate Republicans noted that Freddie Mac may decide to dole out these subsidies to “anyone who self-identifies as Black, Latino, or American Indian/Native American.” Fannie Mae will focus on “the needs of “Black homeowners and renters.”

The Senate Banking Republicans said that the FHFA proposal seems “intent on repeating the mistakes of the recent past,” in reference to the 2008 financial crisis. They explained:

Subsidized risk taking helped homeowners take on more taxpayer-subsidized mortgage debt. While this scheme to subsidize excessive risk taking led to huge profits for GSEs’ [Freddie Mac and Fannie Mae] shareholders, it left behind massive damage for the taxpayers and homeowners. The lasting legacy was the GSEs’ eventual insolvency, their $190 billion in taxpayer bailouts, and a wave of foreclosures that wiped out millions of homeowners, hurting many minority families that were beginning to accrue generational wealth.

The Republicans also noted that there are five main issues with the Biden administration proposal:

1. The plans are “manifestly unfair and should be unconstitutional. Discrimination of skin color is simply wrong. That remains true even when intended to benefit minorities.”
2. The race-based subsidies would set up “minority borrowers for failure” by relaxing underwriting — lowering down payment requirements and expanding credit criteria, for example.
3. There is no law authorizing the FHFA to pursue affirmative action in housing.
4. It would be Fannie Mae and Freddie Mac mission creep by expanding the GSEs into the title insurance market, the appraisal market, and the lending market.
5. It would politicize Fannie Mae and Freddie Mac by having them pursue a “progressive racial equity agenda.”

“Given these concerns, and in anticipation of litigation challenging the legality of these plans, we ask each GSE to retain all correspondence with FHFA and other records relating to these plans,” the Senate Republicans wrote.

Sens. Tillis, Pat Toomey (R-PA), Richard Shelby (R-AL), Mike Crapo (R-ID), Tim Scott (R-SC), Mike Rounds (R-SD), John Kennedy (R-LA), Bill Hagerty (R-TN), Cynthia Lummis (R-WY), Jerry Moran (R-KS), Kevin Cramer (R-ND), and Steve Daines (R-MT) signed on to the letter to the FHFA.

Toomey, the ranking member of the Senate Banking Committee, said during a hearing on housing on Thursday:

FHFA recently relaxed restrictions on the GSEs’ risk layering and acquisitions of investor and second home loans; reduced the GSEs’ guarantee fees; and required the GSEs to develop equitable housing finance plans. Stunningly, the GSEs’ new proposed pilot programs limit eligibility based on borrower race, and even go so far as to give taxpayer money to certain borrowers based on their skin color to make down payments.

Yesterday, all Banking Republicans sent a letter organized by Senator Tillis to FHFA expressing grave concern about the legality and discriminatory nature of these new programs. I hope the FHFA Director will reconsider this discrimination on the basis of race and instead act to protect taxpayers from excessive risk as conservatorship envisions.

“Racial discrimination is always wrong, and this is no exception. Further, relaxing underwriting requirements to chase political priorities risks exposing low-income families—in this case minorities—to wealth loss,” Toomey added.

Sean Moran is a congressional reporter for Breitbart News. Follow him on Twitter @SeanMoran3.