AlyssaKatz.com

The future revealed

If you want to see what the future of home mortgages looks like, it’s lurking somewhere in the testimony the Mortgage Bankers Association presented to Congress this week. In a reasoned policy document that the mortgage bankers should have thought of writing about 15 years ago, the MBA’s Council on Ensuring Mortgage Liquidity lays out principles for how a home finance system should work as well as nine different models that could get it there – everything from covered bonds (aka the Danish system) to a public utility to keeping Fannie Mae and Freddie Mac as the main forces generating funds.

Creating a fully privatized finance system is on the list of options, but not something the mortgage bankers, homebuilders or Realtors (I don’t dare lowercase the “r”) support – why should they if they can benefit from government subsidies and guarantees through a strong government role? Indeed, some of the backing the mortgage bankers are asking the feds to provide would hand additional risks on the public sector, in the name of stabilizing the mortgage markets and maintaining credit for the biggest number of borrowers possible – a bargain Congress ought to be wary of.

As recently as last summer, in the breath between Freddie Mac’s collapse and the Lehman implosion, the calls for privatizing Fannie Mae and Freddie Mac came loud and often. What a difference less than a year makes. This week’s hearings featured just one token opponent of keeping Fannie and Freddie as public entities at the heart of the mortgage market, Dr. Lawrence J. White of NYU’s Stern School of Business. He called for the privatization of the agencies, along with a “program of targeted assistance to low- and moderate-income households to encourage them to become homeowners.” I can’t think of a more reckless combination – it’s like turning the clock back to 2003.

June 5th, 2009 | Tags: Fannie Mae, Freddie Mac, Mortgage Bankers Association
Posted in A Lot More | 1 Comment »