* Housing regulator cautiously optimistic recovery underway
* Question of government's role in housing needs resolution
WASHINGTON Nov 28 The chief U.S. housing
regulator on Wednesday expressed optimism that the deep downturn
in the nation's property market was finally over, but said the
future of the government's role in housing finance needed to be
settled for long-term health.
"I am cautiously optimistic that the signs of stability -
and in some areas, strength - that have started to emerge in
certain sectors of the housing market are signals that it is
beginning to recover," Edward DeMarco, acting director of the
Federal Housing Finance Agency, told the Exchequer Club.
U.S. homes prices have risen for eight straight months, a
report showed earlier this week, and sales activity has also
picked up, although data on Wednesday showed sales of new homes
FHFA oversees Fannie Mae and Freddie Mac
, the nation's two dominant mortgage finance firms,
which were placed in a government conservatorship in 2008 as
mortgage losses threatened their solvency.
They have received almost $190 billion in taxpayer funds and
have returned about $50 billion to the U.S. Treasury in the form
"It is vital to the long-term health of our country's
housing and financial markets that our elected leaders seek to
bring the conservatorships to a conclusion, and to define the
government's role and requirements for housing finance in the
future," DeMarco said.
The government's footprint in U.S. housing has grown sharply
since 2006, when the nation's housing bubble burst and private
credit dried up. Fannie Mae, Freddie Mac and the Federal Housing
Administration account for nearly nine of every 10 mortgages.
Democrats and Republicans alike agree on the need to scale
back that support, but they disagree on the precise role
Washington should play in supporting homeownership.
NO SIMPLE SOLUTION
"Clearly there is no simple solution, and a number of
fundamental questions will have to be answered. FHFA is taking a
number of steps that have potential to transfer some credit risk
to the private sector," said DeMarco.
"We will continue to make progress in this area, but if
policy makers are serious about limiting the government's role,
more direct action may be needed to have significant near-term
He said talks about the government's role in the housing
market should cover the topic of whether the limits on the loans
that Fannie Mae and Freddie Mac can back are too high and
benefit wealthy buyers who do not need help accessing credit.
These so-called conforming loans limits were increased in
2008 to as high as $729,750 in the most expensive real estate
markets to stabilize the housing sector at a time when private
banks were reluctant to lend.
"Who are the intended beneficiaries of the taxpayers'
support? This needs to be on the table and discussed so that we
make sure we have the right policies," said DeMarco.
Fannie Mae and Freddie Mac buy mortgages from lenders and
repackage them as securities for investors to provide a steady
stream of liquidity to the market. Both have turned profits
recently, helped by improving housing market conditions, and
they have been able to curtail their reliance on taxpayers.
Despite pressure from the White House, DeMarco has refused
to allow Fannie Mae and Freddie Mac reduce loan principal for
trouble borrowers, arguing that there are other ways to provide
mortgage relief at less risk to taxpayers.
His opposition to the proposal has fueled speculation that
President Barack Obama would seek to oust him.
On Wednesday, he offered no sign that he was leaving.
"I will continue to pour everything I have into this job for
as long I am asked by the president to continue to serve,"