As an official in an Oregon-based mortgage company and past board member of the Federal Home Loan Bank, I have seen what homeownership means to first-time homebuyers.
For many, it is the culmination of years of hard work and savings that results in the proud moment of a shiny new key to their own front door. Since June is Homeownership Month, we should all take a moment to appreciate what makes these special moments possible.
In 1970, Congress chartered two government-sponsored enterprises, Freddie Mac and Fannie Mae, to help expand homeownership in the United States by establishing home financing programs that make it possible for working class and minority families to afford to purchase a home.
More than 30 years later, the government-sponsored enterprises have exceeded everyone's expectations. By providing a secondary market in home mortgages, Fannie and Freddie have promoted a competitive mortgage marketplace that has kept interest rates low for all homebuyers.
They have also been instrumental in establishing the "Great American Mortgage" — the 30-year fixed rate with low pre-payment penalties. Today, the U.S. homeownership rate has reached an unprecedented level of 70 percent — largely due to the strength and flexibility of government-sponsored enterprises.
Homeownership rates for minorities have also increased. In fact, half of all mortgages purchased by Freddie Mac now support housing for low-to-moderate income families. This has contributed considerably to the rise in minority homeownership in the last three decades. Here in Oregon, however, we still have a long way to go. Latino and African American homeownership rates still lag 40 percent behind the state's average rate of homeownership.
Homeownership is a significant part of the American dream. It helps build personal wealth, safe communities and good schools. Homeownership also strengthens our local, state and national economies. Right now, there are thousands of minority families who dream of buying a place they can call home. But if Congress imposes harsh regulatory restrictions on the government-sponsored enterprises, it will place yet another hurdle along their path to homeownership.
No one disagrees that significant accounting and oversight problems have made reform of government-sponsored enterprises necessary. But, our elected leaders in Congress must be very careful not to throw the baby out with the bathwater. It is time to pass a sensible reform package that establishes a strong regulator to oversee these enterprises to ensure that their financial activities are safe and sound. Provisions that increase the supply of affordable housing are also welcome.
But capping Freddie Mac and Fannie Mae's investment portfolio by hundreds of billions of dollars is a bad idea. This will only severely limit their ability to continue providing homeownership opportunities to those who need it most.
As we celebrate Homeownership Month in June, we must remind Congress that for 36 years, government-sponsored enterprises have helped millions of Americans afford their own homes. But, there are still millions of other families — especially minorities — who need affordable home financing to realize their dream of becoming homeowners.
Hector Ariceaga is vice president of business and technology development the First American Title Insurance Co. of Oregon.