According to members of a panel at the National Association of Realtors (NAR) 2011 Midyear Legislative Meetings and Trade Expo, the housing market and the economy need a reliable housing finance market in order to recover and the federal government will need to play a role in the secondary mortgage market in order to make that happen[1]. Without a viable replacement for the GSEs, explained Steve Brown, 2011 NAR first vice president nominee, eliminating Fannie Mae and Freddie Mac “will severely restrict mortgage capital and result in higher fees and costs for qualified buyers.” Brown believes that “reform of the secondary mortgage market needs to be comprehensive and undertaken methodically.”
While other panelists noted that they believed government involvement in the finance market is unhealthy, none believed that Fannie or Freddie should be eliminated in the near future. Several proposed that private capital be encouraged to return to the housing finance market, but none believed it could be done on a grand scale or in the near future, as proponents of proposals to eliminate the GSEs have suggested[2]. David Katkov, executive vice president and chief business officer at the PMI Group, called the concept of transitioning to a purely private market “naïve,” adding that “the U.S.’s housing finance system dwarfs that of other countries and is far more complex” in order to support his view that while private finance works elsewhere, it will not work for the U.S.
Do you agree that the federal government cannot make a viable exit from housing finance in the United States?
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[1] http://nationalmortgageprofessional.com/news25062/panel-concludes-housing-finance-necessary-boost-market
[2] http://www.mortgagenewsdaily.com/05112011_gse_reform.asp
Interest rates for private mortgage lenders need to yeild 10% min, and must be secure for them. Their security has to be priced below projected declines for maybe 10 yrs of a 30yr fixed loan.
There is too much concern voiced about buyer qualifications and huge down payments needed. Income stability and willingness to pay, also future property value greater than debt service are requirements that must be considered by all lenders
Large down payments and declining market values are the problem for qualified buyers and lenders. Govt backed NINJNA (No Income, No Job, No Assets)loans created this mamouth problem that destroyed retirement, insurance, and pension plans and individual equity nest eggs.
Not a simple solution, but lenders need to quickly short sell deep enough to allow for reasonable repair and long term colateral devaluation. If unemployment plus underemploment reaches 50% we still have a 50% employed buyer pool.
Good solution: Low down, low price, Fast approval, bank financed forclosures for responsible ready willing and able home buyers. Stop road blocks, put building and support industrys back to work. Financing these forclosures converts them from non performong nightmares to performing loans that will increase lender banks borrowing power. The greatest benefit to the economy , it will reverse the declining value of all Real Eestate if done in mass.
Frank B
Enough said, Frank B got it right. All recent government intervention in the market has had the opposite effect to the problem that it was intended to solve. The mistakes of the past also fit that same description. It sort of makes you wonder why the government is involved in home financing in the first place. Guarantee programs like FHA and USDA Rural Housing have their place but leave the loan approval process to the folks that know what they are doing.