WASHINGTON, April 16 President Barack Obama's
top housing official on Wednesday said a proposed Senate bill
provides the best chance to overhaul the mortgage finance system
this decade, but more debate over down payment requirements for
government-backed loans is needed.
"Despite its imperfections, this bill represents real
progress and that's why we have got to pursue it," U.S. Housing
and Urban Development Secretary Shaun Donovan said at a
conference hosted by the National Council of La Raza and other
civil rights and housing groups. "We must take action."
Donovan gave the speech in hopes of reassuring housing
advocacy and civil rights groups, which oppose the proposed
Senate plan over worries that it would create a system that will
prevent less affluent Americans from accessing credit even if a
government role is retained.
His push comes as Senate Banking Committee leaders are
negotiating with other senators and aiming to reach a compromise
on their bill to wind down government-run mortgage financiers
Fannie Mae and Freddie Mac. The panel is
expected to consider the bill at the end of April.
"This is the single best chance that we will have...it may
very well be the only chance we have this decade," Donovan said
in an interview of the prospects of enacting reform if the
banking panel does not approve the proposed bill.
Under the draft bill, released last month, Fannie and
Freddie would be replaced by a new industry-financed agency. The
agency would provide a government backstop for mortgages, but
only after private creditors shouldered 10 percent of any
The proposal also would mandate that strong underwriting
standards be built into the new system. It would require a 5
percent down payment for all but first-time buyers, who would
only face a 3.5 percent threshold.
Committee Chairman Tim Johnson, a Democrat, and top
Republican Mike Crapo authored the measure.
Civil rights groups and consumer and housing advocates
believe requiring minimum down payments would price out of the
market some low-wealth people who would nonetheless be good
borrowers. Donovan did not express an opinion on down payments
but said the discussion over whether such requirements are fair
"I have heard concerns about locking that into legislation.
I understand the reasons for that concern," Donovan said. He
added that regulators would have the ability to toughen those
standards, and perhaps make mortgages less available.
"It's an important discussion we have to have," he said.
Johnson is attempting to coax the panel's Democrats into
supporting the bill. They have started to splinter over
reservations about how much the bill reduces the government's
support for the housing market and whether it adequately
promotes affordable housing programs.
Republicans may support the overhaul, but it's unclear
whether they would back down if more emphasis is placed on
low-incoming housing initiatives in the negotiation process.
(Reporting by Margaret Chadbourn; Editing by Leslie Adler)