FHFA Director Mel Watt testified before the House Financial Services Committee on October 3 in a hearing entitled, “Sustainable Housing Finance: An Update from the Director of the Federal Housing Finance Agency.” NMHC/NAA outlined the apartment industry’s core housing finance reform principles in a letter submitted for the record.
The focus of the hearing included an update on the GSE conservatorship, current participation of private capital in mortgage finance and the future of housing finance reform. A number of issues important to multifamily were discussed during the hearing. Congresswoman Carolyn Maloney (D-NY) took advantage of her time for questions to highlight the strong performance of the multifamily businesses, including a mention of their strong credit risk transfer legacy. She specifically asked Director Watt about whether the multifamily businesses should be separated and spun out as part of housing finance reform. Director Watt demurred, but acknowledged the strong performance of multifamily businesses and the significant private capital protecting taxpayers in both company models.
Congresswoman Gwen Moore (D-WI) focused on the importance of the multifamily activities, prompting Director Watt to admit “more and more” households have moved toward multifamily housing since the financial crisis, further emphasizing the importance of the Enterprises in the market.
Other issues raised at the hearing included a discussion of rental housing affordability and the shortfall in apartment supply for a number of markets. A number of members, including Ranking Member Maxine Waters (D-CA) and Emanuel Cleaver (D-MO), focused on housing affordability and overall questions of supply. Congresswoman Nydia Velasquez (D-NY) pressed Director Watt on the importance of NFIP and the potential for increased private sector participation on offering flood insurance policies. Director Watt agreed with the Congresswoman on the importance of the program and acknowledged that the GSEs are open to accepting flood insurance policies from non-federal providers, if they are equivalent in quality and protection.
Moving to cybersecurity, Subcommittee Chairman Blaine Luetkemeyer (R-MO) raised the issue of data breaches, which Director Watt assured him was a priority for FHFA and the GSEs, including close communication in the event of a breach at either Enterprise. Lastly, in an exchange with Congressman Mike Capuano (D-MA), Director Watt acknowledged he is working with Treasury Secretary Steven Mnuchin on determining a solution for the dwindling capital buffer at both GSEs, potentially staging action in this area later this fall.