By State Sen. Jamie Eldridge, D-Acton, co-chair of the Joint Committee on Housing
Often, issues that arise in Washington don’t affect the average Massachusetts resident – usually the partisan gridlock prevents sweeping policy changes from interrupting our everyday lives. However, when there is legislation pending on Capitol Hill that impacts home ownership and the ability to get a mortgage, we need to listen.
As the Senate Chairman of the Joint Committee on Housing, I know that for countless Massachusetts families in and around our area, buying a home is the biggest investment they will ever make. In 2012 alone, reports show nearly a quarter of working households in the state spent more than half their income on housing.
For all current and future homeowners in Marlborough, Hudson, Stow, Sudbury and beyond, the possibility of homeownership has always been a cornerstone of the American Dream. So, for working families, housing policy is economic policy.
After a turbulent few years, the local area is finally back on the path to a recovering housing market. While we’re not out of the woods, locally and nationally we’re moving forward. But now Washington is threatening to upset that fragile progress with a misguided and troubling proposal to wind down Fannie Mae and Freddie Mac and put Wall Street back in charge of the housing sector.
The inherent problem with this proposal, known as the Johnson-Crapo bill, is that it puts the future homeownership of our friends and families at risk. Fannie and Freddie have broadened the availability of the 30-year fixed-rate mortgage, a product which provides stable, affordable, and sustainable home financing for middle class families. Putting our mortgages in the hands of big banks is likely to significantly increase interest rates and put homeownership out of reach for many Massachusetts families.
And for those fortunate homeowners that would manage to qualify for a mortgage under this more exclusive environment, it would be that much harder to make monthly payments. Studies by housing experts have shown that the dissolution of Fannie and Freddie could cause mortgage interest rates to spike. If the housing market is controlled by the Wall Street banks, there will be fewer opportunities for fair and inclusive homeownership.
While Washington continues to stay embroiled in debates about whether Fannie and Freddie should cease to exist, it is increasingly clear that the real question – the one that truly matters for all current and future homeowners – is how we continue to build on the systems that has provided the best path to affordable housing. Fannie and Freddie – created by President Roosevelt as part of the New Deal – give homeowners the security of a stable monthly payment.
Further reform of our housing finance market is absolutely needed. But we should be expanding opportunity – not narrowing it.
Fannie and Freddie have provided a path to the middle class for generations of Americans. As much as anything, they are important reminders that prosperity is attainable for each of us. And importantly, they’re run by professionals, not politicians or bankers.
Since we can’t count on Wall Street or Washington to stand up for Massachusetts’ future homeowners, we need independent organizations like Fannie and Freddie that will. We all need to watch these Washington developments closely in the weeks ahead.