President Calls for Ending Freddie and Fannie, Hints at HARP Expansion

PresidentrnBarack Obama, speaking to an audience in Phoenix yesterday, tied hisrnproposal reforming the U.S. housing system to both his on-going themernof shoring up the middle class and to immigration reform. Among hisrnspecific proposals were the gradual elimination of Fannie Mae andrnFreddie Mac and the need to insure the availability of decent andrnaffordable rental housing. </p

Callingrnowning a home “the ultimate evidence that here in America, hardrnwork pays off, that responsibility is rewarded,” he pointed tornthe difference between when his grandfather was able to buy his firstrnhome with an FHA loan and the events leading up to the recent crisis.rn”In that earlier generation, houses weren’t for flippingrnaround, they weren’t for speculation — houses were to live in, andrnto build a life with.” But unfortunately, he said,rnresponsibility gave way to recklessness – and triggered a recession. </p

ThernPresident enumerated some of the steps that the government hasrnalready taken to reverse the decline in housing and some of thernrecent signs of recovery, emphasizing that housing isn’t justrnimportant for the person who owns the house – it impacts the entirerneconomy “Construction workers, contractors, suppliers, carpetrnmakers, all these folks are impacted by the housing industry.”</p

We’vernmade progress, he said, but we’ve got to build on this progress andrn”turn the page on this kind of bubble-and-bust mentality thatrnhelped to create this mess in the first place. We’ve got to build arnhousing system that is durable and fair and rewards responsibilityrnfor generations to come”. </p

Therernare, he said, five immediate steps that must be taken:</p<ul<li

Congressrnshould pass a bill giving every homeowner the chance to savernthousands of dollars a year by refinancing their mortgage at today’srnrates. </p</li<li

We’vernmade it harder for reckless buyers to buy homes that they can’trnafford now we must make it easier for qualified buyers to buy onesrnthey can afford by simplifying overlapping regulations, cutting redrntape, and giving persons who have worked hard to repair their creditrna second chance.</p</li<li

Wernmust fix our broken immigration system because when more people canrnbuy homes and play by the rules, home values go up for everybody. One recent study showed the average homeowner has already seen thernvalue of their home boosted by thousands of dollars because ofrnimmigration. </p</li<li

Rebuildrnthe communities hardest hit by the housing crash; puttingrnconstruction workers back to work repairing rundown homes, tearingrndown vacant properties so that the value of homes in thosernsurrounding areas start picking up. </p</li<li

Makernsure families that can’t or don’t want to buy a home still have a<bdecent place to rent. Instead of making everyone feel like theyrnmust own a home, even if they weren’t ready let’s invest inrnaffordable rental housing. Let’s bring together cities and statesrnto address local barriers that drive up rents for working families. rn</p</li</ul

Asrnhome prices rise, we don’t want another bubble, he said, we wantrnsomething stable and steady. ‘And that’s why I want to lay arnrock-solid foundation to make sure the kind of crisis we went throughrnnever happens again.” To that end, he said, we must wind downrnFannie Mae and Freddie Mac, the two companies that are not reallyrngovernment but not really private sector. “For too long, theserncompanies were allowed to make huge profits buying mortgages, knowingrnthat if their bets went bad, taxpayers would be left holding the bag.rn It was “heads we win, tails you lose.” “It helped to inflaternthis bubble in a way that ultimately killed Main Street.”</p

Hernsaid a bipartisan group of senators is working to end these tworncompanies (referring to the Corker-Warner bill), “Andrnthey’re following four core principles for what I believe this reformrnshould look like. “</p

First,rnprivate capital should take a bigger role in the mortgage market. There should be a limited government role and private lending shouldrnbe the backbone of the housing market including community-basedrnlenders “who view their borrowers not as a number, but as arnneighbor.” </p

Second,rnwe can’t leave taxpayers on the hook for irresponsibility or badrndecisions by some of these lenders or Fannie Mae or Freddie Mac. “We’ve got to encourage the pursuit of profit, but the era ofrnexpecting a bailout after you pursue your profit and you don’t managernyour risk well — well, that puts the whole country at risk. We’rernnot going to do that anymore.” </p

Thernthird principle is to preserve access to safe and simple mortgagernproducts like the 30-year, fixed-rate mortgage. </p

Fourth,rnwe’ve got to keep housing affordable for first-time homebuyers. Andrnthat means we’ve got to strengthen the FHA so it gives today’srnfamilies a chance to buy a home, and it preserves those rungs on thernladder of opportunity. </p

Andrnwe’ve got to support affordable rental housing and we’ve also got tornkeep up our fight against homelessness. </p

Thernpresident also called on Congress to immediately allow an up-or-downrnvote on the confirmation of James Watt, his nominee to head thernFederal Housing Finance Agency (FHFA) and gave a strong endorsementrnto the work being done to protect homeowners by the ConsumerrnFinancial Protection Bureau.</p

ThernPresident concluded, “Put all these principles together, that’srngoing to protect our entire economy and it will improve the housingrnmarket not just here in Phoenix, but throughout the state andrnthroughout the country. We’ll make owning a home a symbol ofrnresponsibility, not speculation — a source of security forrngenerations to come, just like it was for my grandparents.”</p

Reactionrnreceived by MND to the President’s speech has thus far beenrnsupportive. Rick Judson, chairman of the National Association ofrnHome Builders (NAHB) said his organization applauded the Presidentrnfor “affirming the importance of maintaining a a federal backstoprnas part of efforts to revamp the housing finance system and protectrnthe 30-year mortgage.” Judson said NHAB also supportsrnstrengthening the FHA to facilitate the flow of mortgage credit tornqualified home buyers, cutting red tape and easing tight creditrnconditions that are preventing creditworthy borrowers from obtainingrnhome loans.” </p

MortgagernBankers Association (MBA) President and CEO David H. Stevens said thernPresident’s insistence on transitioning the mortgage market towardrnrelying on private capital was of particular importance as is hisrnapparent willingness to adopt a common securitization platform andrnrisk-share options. Both of these, Stevens said, are key componentsrnof what MBA believes should be part of reforming the secondaryrnmortgage market and both can be implemented now without legislation. </p

Arnstatement from The Center for Responsible Lending (CRL) said, “Nextrnsteps toward a full recovery? Confirm Mel Watt to lead the FederalrnHousing Finance Agency, and then give the common-sense QualifiedrnMortgage (QM) rules time to work, and institute Qualified ResidentialrnMortgage rules that mirror QM rules.” </p

CRLrnstressed that “any entity that replaces Fannie Mae and Freddie Macrnmust include an explicit and paid-for government guarantee and a dutyrnto serve the entire market. The new system must ensure that allrnAmericans have fair access to safe and affordable 30-year fixed raternmortgage credit.” 

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.