Expect Lower Credit Standards, More Risk From Biden Housing Authority
Your editorial “A Conservative Court Awakening” (June 26) rightly says a new Biden administration Federal Housing Finance Agency (FHFA) director will “ease underwriting standards again to boost home-ownership.” But let us restate this more clearly: This director will reduce credit standards and increase risk once again to promote temporary home-ownership through low-credit-quality loans. This will revivify the notorious “originate and sell” model for such loans, so the lenders can stick the taxpayers with the credit risk. Systemic financial risk will rise.
When a regulator becomes a cheerleader, it is always bad news. Even more so in this case because the FHFA director will remain the conservator of Fannie Mae and Freddie Mac, with more power over its charges than a normal regulator. What a chance was missed by the Trump administration Treasury to designate Fannie and Freddie as the “systemically important financial institutions” they are. Then they would be subject to additional risk oversight by the Federal Reserve, instead of simply taking orders from a “housing czar” with an agenda for politicized lending.