What’s next for Fannie and Freddie? – RISMedia |
In June, Sandra Thompson became the acting director of the Federal Housing Finance Agency (FHFA) after a Supreme Court ruling that allowed President Biden to replace the former director. This appointment will likely have a significant impact on the FHFA, which oversees Fannie and Freddie. And since 50-60% of home sales depend on funding from these government sponsored businesses (GSEs), the FHFA is of critical importance to REALTORSÂ® and their businesses.
Fannie Mae and Freddie Mac are federally funded mortgage lenders created by Congress to free up the balance sheets of financial institutions. Neither company creates or provides mortgage services. Instead, they buy loans from lenders, bundle them into mortgage-backed securities, and sell them to investors around the world with collateral, creating a unique system without which millions of people could not. more access to the property. Together, these companies provide a liquid, stable and affordable housing market, even in times of crisis, as happened in 2008 and 2020.
The great recession
Prior to the 2008 financial crisis, GSEs had problems purchasing an inordinate number of private label Mortgage Backed Securities (PLSs) that were loaded with subprime subprime mortgages. When the housing market slowed, these toxic loans pushed up default rates and nearly destroyed the market. The government stepped in, bailed out Fannie and Freddie, and took control. In response to the crisis, Congress created the FHFA in 2008 to regulate and operate GSEs under trusteeship, a system that remains today.
COVID-19 put Fannie and Freddie to an unprecedented test, and overall they performed as expected. During this crisis, they have helped many mortgage lenders by taking immediate action, such as issuing a moratorium on foreclosures and offering forbearance before Congress demands it. GSEs leaned when much of the private market had left, increasing their market share from around 40% to more than half of the market, valued at over $ 10,000 billion. Rates have fallen to pre-crisis levels, home sales have rebounded and housing has become and remains a positive for the economy.
As the person named by Biden, Thompson will likely focus on eliminating economic inequality. Thompson pledged to ensure that the housing finance system works “in a safe and healthy manner”, but said she was concerned about “the widespread lack of affordable housing and access to credit, particularly in rural areas. communities of color “. She considers the duty of the FHFA to be to ensure that “all Americans have equal access to safe, decent and affordable housing”.
On top of that, Thompson is likely to revisit recent changes made by his predecessor in anticipation of the end of the trusteeship established in 2008. These changes make GSEs riskier and less fit to perform their charter functions. For now, Thompson will likely distract from the end of the Guardianship.
These goals align closely with the National Association of REALTORSÂ® (NAR) program. We believe that the transition of GSEs to a utility model is the most efficient and viable approach. Under NAR’s proposal, the GSEs would be re-chartered as private utilities, with Fannie and Freddie’s products, tariffs and operations remaining under government oversight to ensure their mission was met. This public-private collaboration is the most promising model for meeting three imperatives for the market and consumers in all economic conditions: maximizing access to credit, minimizing risks for taxpayers and reducing costs.
During the pandemic, Fannie and Freddie played a central role in helping the market survive and thrive. Going forward, they will remain at the heart of the housing market and the economy at large, and NAR will continue to play a key advisory role, providing immediate on-the-ground expertise and feedback as we work closely with them. senior government officials. officials, academics and business leaders on these vital issues.
Rest assured that NAR fights every day on your behalf to preserve competition, maintain liquidity, support underserved markets, and protect the 30-year fixed rate mortgage for your clients.
Learn more and find out how to get involved on NAR.realtor/GSEvision.
Ken Fears is a Senior Policy Representative, Banks, Loans and Housing Finance, for the National Association of REAL ESTATE AGENTSÂ®.