Bachmann Urges Geithner to Cut Ties with ACORN

It has been reported that the Treasury Department plans to announce another government-run lending program this week which would inject up to $35 billion of taxpayer funding into state and local housing finance agencies (HFAs).  This has been characterized as an effort to stimulate mortgage originations for low- to moderate-income borrowers by allowing Fannie Mae and Freddie Mac to purchase housing bonds and variable-rate demand obligations (VRDOs) issued by HFAs.

A year after the historic establishment of TARP, as the Administration considers whether to extend the authorities it has under that law, I have grave concerns that rather than an exit strategy you are actually considering delving deeper into government intervention in the housing market.  Without question, implementation of this program will further solidify market perceptions that the federal government will always be the lender, buyer, and insurer of last resort.

In addition, concerns have arisen regarding ACORN and its role in this endeavor.  Both the House and the Senate have voted to cut off federal funding to ACORN after videos emerged showing its workers advising a couple on how to avoid taxes and seek HUD grants to set up a prostitution ring.  The Treasury Department’s Inspector General has agreed to launch a full investigation of ACORN and the Census Bureau and the IRS have both severed ties with the group.

Yet today, many HFAs continue to have partnerships with ACORN and its affiliates to provide mortgage counseling services.  ACORN employees, such as those portrayed in this month’s videos, remain authorized to give prospective homebuyers advice on obtaining government-backed loans though HFAs, housing grants, and the like.  Until a thorough investigation is completed and the pattern of indictments, consent decrees and voter registration fraud allegations against ACORN is resolved, American taxpayers should not be forced to purchase debt financing instruments from HFAs that choose to partner with ACORN.  As such, I request that should you move forward with this proposal you explicitly prohibit any HFA that participates from partnering in any way with ACORN.  It is also unclear whether ACORN itself is capable of issuing these bonds and/or VRDOs that Treasury intends to purchase.  As a precaution, I request that you specifically and proactively prohibit ACORN and its affiliates from selling such instruments to the Treasury Department should it engage in these financing activities.

As you finalize the details of your plan, I hope you will consider that this government intervention could spark another unhealthy cycle of excessive lending to borrowers who may be unable to repay their loans in future years.  Private mortgage insurance providers and traditional lenders have shored-up their underwriting requirements in the wake of the financial crisis – a prudent move which could help our nation avoid another meltdown in the future.  But artificially boosting HFA lending could swing the housing market back toward the years of pushing too many Americans into homes they cannot afford.  Just as lending standards encouraged by Community Reinvestment Act mandates produced too many poorly underwritten loans, this program is ripe for similar unintended consequences.

I understand that the Treasury Department is still shaping its plan and I urge you to carefully consider these concerns as you move forward.  Thank you for your consideration and I look forward to hearing from you.

Sincerely,