U.S. lawmakers debate housing finance reform

Tue Sep 13, 2011 1:18pm EDT

  
 * Fannie Mae, Freddie Mac drawn $170 bln in taxpayer funds
 * Many Republicans want to end federal backstop in housing
 * Conforming loan limits on gov't mortgages expire Oct. 1
 By Margaret Chadbourn
 WASHINGTON, Sept 13 (Reuters) - Top Senate lawmakers on
Tuesday laid bare long-standing differences on how to wind down
government-sponsored mortgage enterprises Fannie Mae (FNMA.OB)
and Freddie Mac (FMCC.OB), underscoring the difficulty Congress
will face in revamping the U.S. housing finance system.
 Democrats and Republicans alike agree both entities should
be wound down but whether the government should still have a
role subsidizing housing finance is still unsettled.
 "I am concerned about the unintended consequences for our
housing market and economy that could result if a government
role is eliminated completely," Senate Banking Committee
Chairman Tim Johnson, a South Dakota Democrat, said during the
panel's tenth hearing on housing finance reform.
 He said that record low mortgage rates, which currently
hover around 4 percent, would likely jump across the country if
the government backstop is diminished.
 Fannie Mae and Freddie Mac, the two congressionally
chartered mortgage behemoths seized by the government in 2008
as losses on subprime loans mounted, are critical to the
housing market. They provide financing to banks and lenders by
purchasing mortgages and either keeping them on their books or
packaging them for sale to investors.
 The firms have already soaked up $170 billion in taxpayer
dollars since they were placed under government control.
 "We need a private system to enable institutional
investors," Peter Wallison, a fellow with the conservative
American Enterprise Institute, told the panel. "We are forcing
the taxpayers to take the risk the government is taking."
 Senator Richard Shelby, the top Republican member on the
committee, said there needs to be a "political will" to end the
government backstop in the mortgage market and limit taxpayer
losses. He said the histories of Fannie Mae and Freddie Mac
"play out like a horror movie."
 "Federal guarantees were often viewed as ways to subsidize
homeownership," he said. "It is clear the old way of doing
things failed on a massive scale."
 Any legislation to lessen the government's footprint in
housing finance has to get through both a Democrat-controlled
Senate and Republican-led House of Representatives. It is
likely to be a multi-year effort to complete reforms.
 Republicans in the House have proposed legislation and
alternative housing finance systems, but none have reached the
House floor for a vote.
 The first test of how difficult it might be to wean the
housing market off government support will come at the end of
the month when the so-called conforming loan limit drops back
to pre-financial crisis levels.
 The loan limit puts a cap on the size of mortgages that the
Federal Housing Administration, Fannie Mae and Freddie Mac can
guarantee. They are set to fall from $729,500 to $625,500 on
Oct. 1 in the highest-priced real estate markets.
 Three years after taking control of Fannie Mae and Freddie
Mac, the government now backs nearly nine in 10 new mortgages.
 (Editing by James Dalgleish)



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Comments (1)
TheRonald wrote:
The solution is simple, and has already been proposed to FHFA and Fannie Mae (as well as many banks) … implement the TACT Program. That program is similar to HomePath and HomeSteps, so there’s no need for additional staffing. Most importantly the TACT Program requires NO government funding, will raise housing prices quickly, will pump liquidity into the financial sector, and lest I forget … create JOBS! Yes every foreclosure that is turned into a family home creates jobs.

The TACT Program was developed and successfully implemented by Private Mortgage Lenders (some refer to them as Hard Money lenders). Those lenders survived the massive defaults and foreclosures they faced as housing prices dropped, they survived the Great Recession, and now are thriving since there is virtually no competition for lending. The only bank mortgages being made are those guaranteed by FHA and a few by VA.

The solution is simple, let’s get the government out of the housing business, and implement the TACT Program immediately.

Sep 18, 2011 5:31pm EDT  --  Report as abuse
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