Apparently there is something addictive in the milk dispensed from the federal teat. That’s the only explanation I can come up with for three supposedly private enterprise sorts of organizations arguing in favor of continued and yes, even more federal support for Fannie (FNM) and Freddie (FRE).
At a hearing planned this afternoon before the House subcommittee on government-sponsored enterprises representatives from the Mortgage Bankers Association, National Association of Realtors and National Association of Home Builders are scheduled to make statements in support of government support of the GSE’s.
According to HousingWire, Michael Berman of the Mortgage Bankers Association recommends:
“… explicit guarantees against mortgage investment-related credit risks, the cost of which can be offset by risk-based premiums paid by the investors. He calls for increased private investor participation in the secondary markets to complement the limited government support.”
Frances Martinez of the National Association of Realtors wants more GSE’s, especially one to bailout the jumbo mortgage market:
“For homeowners needing to refinance to a more reasonable mortgage product, the lack of liquidity is all but forcing many homeowners into foreclosure or short sale, which continues to place severe downward pressure on housing and the economy,” Myers says.
Not only will the GSEs need government support going forward, but entities or facilities should be established to provide liquidity in the jumbo and commercial mortgage markets to solve this liquidity issue, Myers adds.
Joe Robson of the National Association of Home Builders wants much more:
Chairman of the National Association of Home Builders, Joe Robson, also appears before the subcommittee today to testify that the affordable housing mission must continue with federal government backing, as the private sector can’t be counted on to maintain affordable housing credit, according to prepared remarks. Robson says the GSEs, responding to the economic contraction, tightened underwriting standards perhaps too much and must be reigned in if credit will continue flowing.
“We believe that the actions of the enterprises have forced the pendulum to swing too far, and, as a result, viable buyers are being denied credit,” he says. “While the enterprises must operate in a safe and sound manner, beyond a point, such self-selecting measures become too restrictive.”
I believe that sometime around the end of September there is a deadline that calls for some resolution of the status of Fannie and Freddie. Currently they exist is some sort of altered state. The government owns 79.9% of each but in fact acts as the owner of the companies. Substantial future advances are required to keep them afloat. Neither fish nor fowl they drift along doing the bidding of the Obama administration with little transparency or accountability.
A very important point to keep in mind is that who ever controls the means of financing real estate, essentially controls real estate. The life blood of the industry is debt. Effectively these representatives of private enterprise are proposing the furtherance of a system that will make them servants of the federal government. Short term it might benefit their interests but in the long term they’ll come to know the feel of the whip.
Before they make their pitches for more government they might want to talk to Jamie Dimon or Lloyd Blankfein or any of the other bank CEO’s who have seen the down-side of too much government help. There’s a reason that these guys are moving heaven and earth to get as far away from the government as possible. The rules have changed. Government now extracts much more for its subsidies. You may not like price you’re going to pay.