Remarks by The Honorable Mel Martinez before
the House Financial Services Committee on Government Sponsored Enterprises
September 10, 2003
Oxley, Ranking Member Frank, Distinguished Members of the Committee:
welcome the opportunity to join Secretary Snow in describing for
the Committee the Administration's views on improving and reforming
regulatory oversight of the housing government-sponsored enterprises.
Snow has outlined the principles and priorities the Administration
supports. He and I are in full agreement; Congress and the Administration
have an opportunity and an obligation to strengthen the regulatory
structure of the GSEs. A strong regulator is in everyone's best
interests - the Administration, Congress, Wall Street, investors
worldwide, and most importantly, the American taxpayer.
Administration has a dual goal. We must ensure that, through the
GSEs, financing is available for low- and moderate-income families.
And we must ensure that the GSEs are subject to rigorous oversight,
so that they are serving their public purpose.
housing sector directly accounts for about 14 percent of the nation's
total Gross Domestic Product, and the housing market actively drives
other closely related components of the economy as well. The GSEs
play an integral role in our nation's housing finance system by
expanding the availability of mortgage credit. The liquidity and
stability they provide have helped buoy the nation's economy. Because
of the housing GSEs' impact on the economy, it is critical that
we ensure their safety and soundness.
Office of Federal Housing Enterprise Oversight was established following
the thrift crisis as an independent safety and soundness regulator,
within HUD, for Fannie Mae and Freddie Mac. There is a misconception
that HUD controls and has direct authority over OFHEO in the exercise
of its safety and soundness duties. HUD does not. By statute, Congress
has mandated that OFHEO's safety and soundness determinations must
be made independently of HUD.
ensure that the GSEs have appropriate financial oversight and are
held accountable to their public mission, the Administration supports
strengthening the powers of the GSEs' regulator. Doing so would
make the regulator more comparable to the stature, powers, authority,
and resources of other financial regulators charged with safety
and soundness oversight. Such a concept has worked well for financial
regulators in other instances, including the Office of the Comptroller
of the Currency and the Office of Thrift Supervision.
safety and soundness regulation is divided, with new program approval
authority at HUD and financial oversight at OFHEO. It is the position
of the Administration that both elements of safety and soundness
regulation need to be consolidated in a single regulator.
Secretary Snow noted, the Administration considers it appropriate
to transfer authority over new program approval from HUD to a new,
strengthened regulator. HUD supports transferring and strengthening
such authority to include review of all activities, new and on going.
Such changes will consolidate and enhance the regulator's oversight
responsibility, and increase investor confidence in the GSEs.
part of this transfer, the Administration is also proposing that
the HUD Secretary continue to be consulted on new activities requested
by the GSEs. Many new activities directly impact the mortgage and
housing markets, where HUD has substantial expertise. This makes
it essential that such consultation take place.
safety and soundness regulation should be exercised by a single,
independent regulator, the Administration strongly supports retaining
another core element of the GSEs' charter - the housing goals -
established Fannie Mae and Freddie Mac to provide market liquidity
and to facilitate the financing of affordable housing for low- and
moderate-income families. Congress also mandated that the HUD Secretary
set housing goals to ensure that those needs are met. The affordable
housing goals were created to ensure the GSEs are serving individuals
in those communities that are most in need.
goals direct the GSEs to serve low- and moderate-income families
and provide funding in underserved areas, such as central cities
and rural areas. A third goal directs the GSEs to finance housing
for very low and low-income families.
the low- and moderate-income housing goal requires that at least
half of all Fannie Mae and Freddie Mac mortgage purchases benefit
families in this income bracket. As the President's budget noted
in February, numerous HUD studies and independent analysis have
shown that the GSEs have historically lagged the primary market,
instead of led it, with respect to funding mortgage loans for low-income
and minority homebuyers. The GSEs have also accounted for a relatively
small share of first-time minority homebuyers.
is the appropriate agency to develop and enforce the housing goals.
Institutionally, our mission is devoted to furthering the goal of
affordable housing and homeownership, and HUD has the most expertise
in this area. Furthermore, the housing industry looks to HUD as
the agency in which this authority should reside.
to strengthen HUD's housing goal authority, the Administration considers
it appropriate to:
a new GSE Housing Office within HUD, independently funded by the
GSEs, to establish, maintain, and enforce the housing goals;
HUD new administrative authority to enforce its housing goals;
enhanced civil penalties for failure to meet housing goals;
provide that the GSEs act to increase homeownership, and;
authority to set housing goals and subgoals beyond the three currently
established for moderate-income, geographic area, and special affordable
me stress that we believe such a comprehensive change to the regulatory
structure will strengthen the confidence of all GSE stakeholders.
Investors will be better protected under a regulatory system that
empowers the regulator to do the job we expect of them
the American taxpayers will ultimately benefit.
Snow and I look forward to working with the Committee members to
strengthen oversight of the housing GSEs - to ensure that they are
in every way meeting their public purpose and that homeownership
continues to be an affordable option for America's families.