Posted by: realtormarkpalace | February 11, 2011

NAR: Keep government involved in mortgages

WASHINGTON – Feb. 10, 2011 – Continued government participation in the secondary mortgage market is essential to ensuring affordable and available home mortgages to qualified consumers when private lenders withdraw from the market, according to the National Association of Realtors®’ (NAR) recommendations for restructuring Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) taken over by the government during the recent mortgage meltdown.

The U.S. House Financial Services Subcommittee convened yesterday for its first hearing to debate the future of the GSEs. A number of paths have been debated, but NAR recommends that the government restructure Fannie and Freddie as government-chartered, non-shareholder owned authorities. In that role, the GSEs would protect taxpayers and assure access to affordable mortgages.

NAR has outlined its goals in a five-page report.

“As the leading advocate for homeownership, NAR believes that the federal government must continue to play a role in the mortgage markets to ensure the steady flow of safe and affordable mortgage funding that middle-class consumers need, and only the government can provide that backing,” said NAR President Ron Phipps.

NAR believes the previous structure of Fannie Mae and Freddie Mac with private profits and taxpayer loss must never recur; however, without some level of government backing of the most basic, simple mortgages – such as the 30-year fixed rate product – interest rates and mortgage fees will be notably higher for consumers and could severely restrict access to credit, especially during down or disruptive markets. The recent economic downturn, for example, caused private capital to flee the marketplace – government backing of residential mortgages was critical in providing capital to borrowers and without their support the financial crisis could have been far worse.

NAR encourages private market solutions and innovations such as covered bonds for less traditional mortgages. However, a full privatization across all mortgage products will inevitably put taxpayers at risk. Given the very high concentration in the banking industry, the market will be vulnerable to tacit collusion and too-big-to-fail mistakes.

“An efficient and adequately regulated secondary mortgage market is essential to providing affordable mortgages to consumers; without it the availability of safe, reliable mortgage products like the 15- and 30-year fixed rate loans mortgage might not exist, and mortgage rates could increase by as much as 2 percentage points, making home ownership unaffordable for many Americans,” said Phipps.

Under NAR’s plan, the restructured GSEs would ensure a wide range of safe, reliable mortgage products, such as 15- and 30-year fixed rate loans using sensible underwriting standards. They would be self-financing and subject to tight regulations to accomplish their mission and protect taxpayer dollars.

“It’s essential that borrowers continue to have access to safe and affordable mortgage credit,” said Phipps.

© 2011 Florida Realtors®

 

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