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Public Statements

Federal Housing Finance Reform Act of 2007

Floor Speech

Location: Washington, DC

FEDERAL HOUSING FINANCE REFORM ACT OF 2007 -- (House of Representatives - May 17, 2007)


Mr. BAKER. Mr. Chairman, I move to strike the last word.

Mr. Chairman, I wish to compliment the gentleman from New Jersey on his intended goal and merely point out the defects that exist in the current system.

I want to make clear, I am a strong advocate of affordable housing and have gone to some trouble to examine the current portfolio of both Freddie Mac and Fannie Mae.

The one thing I think is consistent and hopefully will not be objected to is to observe that poor people generally don't have money. And so when you go to a closing of a house, regardless of the price, that's not an issue, you are going to try to get as much of that appraised value financed as possible, maybe come up with the closing costs. In a lot of cases, people are actually financing the closing costs too.

So it would make sense, if you looked at an analysis of the GSE's portfolio mortgage holdings and determined the loan-to-value ratio, meaning, if it was a $100,000 house and you were borrowing at least $95,000, or up, 96, 97, 98, 99, maybe 101 because you needed help with the closing costs, that there ought to be a disproportionate amount of those loans in their portfolio as compared to, say, a commercial bank.

When you look at Fannie and Freddie's portfolio holdings, you find that Freddie has 1.5 percent of their mortgages in a 95 percent plus range. You find Fannie Mae slightly better at 2.8 95 percent plus. So then you back off and say, my goodness, if only 1 or 2 percent is in those very high-leveraged loans, where are they making their money? And where you find the bulk of their loans is in two wage earners per household who are buying a second, third home because they have 60 to 70 LTV, meaning they are putting down a bunch of money. So even if you are a person buying a modest home of $100,000, that means that you are putting down $30,000 or $40,000 at time of closing. That is not my definition of ``poor person.''

If we really want to get focused, and this is a sincere observation about these corporations, they are driven to make a profit my their shareholders.

Nothing wrong with that. But they have been given special privilege by this Congress to accomplish a particular mission, and that is to help low-income first-time home buyers. That is why I am not as affronted by the chairman's concept as some may be. This is a specific requirement to spend $500 million on affordable housing.

But to suggest that the gentleman is trying to somehow constrain the target of helping low-income people because they do such a wonderful job now, I have to suggest to you that that is really off the mark. They do a very poor job of helping first-time home buyers and low-income individuals get access to homeownership. They are in the business to make money. They do it quite well. They are the only corporation of their scale that returns double digit rates of return year after year, whether there is a housing crisis or a finance crisis, it's the facts.

I would love to work with the other side in focusing these huge corporations into the mission that Congress has described for them to perform.


Mr. BAKER. Mr. Chairman, I appreciate your courtesy. I will be very brief. I know your time is limited.

I just wish to express to you on behalf of the Louisiana delegation, our appreciation to you, your constituents, the city of Houston, and Texas, for your outstanding generosity and assistance. We hope to continue those feelings by having you leave our money alone.


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