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Treasury: Overhaul Plan for Fannie, Freddie Set for January
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The Obama Administration is six months away from presenting Congress with a “comprehensive” reform of the much-troubled and maligned mortgage financing system – primarily driven by Fannie Mae and Freddie Mac, according to a White House blog post by a Treasury official.
The administration has been under pressure from Republicans and some Democrats to overhaul Fannie and Freddie, which combined have siphoned $145 billion in bailouts – an amount that could reach $300 billion by some estimates.
Republicans have denounced the Wall Street financial reform bill signed by President Obama this month for leaving out any plan for restructuring Fannie and Freddie. Republican leaders have been pushing for phasing out the two government-sponsored entities, and shifting most of mortgage financing to the private sector.
But Fannie and Freddie have been under U.S. conservatorship since September 2008, in the wake of massive losses tied to acquisitions of private-label and subprime-mortgage backed securities. Those faltering mortgages backed by Fannie and Freddie fueled the housing bubble and subsequent financial crisis.
The Congressional mission of both companies is to maintain liquidity for the vital housing industry, ensuring the lenders can continue to finance mortgage loans.
The current sluggish state of the housing market is holding back a faster pace of economic recovery.
The Obama Administration will host an Aug. 17 “Conference on the Future of Housing Finance” at the U.S. Treasury Department in Washington, D.C. The event will bring together leading “academic experts, consumer and community organizations, industry groups, market participants, and other stakeholders for an open discussion about housing finance reform.”
“Work on this issue is well under way, as the Obama Administration continues to develop a comprehensive reform proposal for delivery to Congress by January 2011,” said Jeffrey A. Goldstein, Under Secretary for Domestic Finance at the U.S. Treasury Department.
But abrupt change or an uncertain reform process could be more damaging to an already fragile recover, Goldstein said.
“Continuing to provide financial support to Fannie Mae and Freddie Mac was the right decision then for the mortgage market and for our economic recovery – and it has played a critical role in stabilizing the housing industry during a period of crisis,” Goldstein said.
Read Goldstein’s blog post.
With approximately half the country having a Fico score of less than 700 and as such less than good and these people basically shut out from getting a mortgage, there is no way that there can be a recovery. Hopefully the reform will loosen the reins so that the biggest industry in the country, real estate can again flourish. Qualifications don’t need to go back to what they were when subprime was in but should not exceed FHA guidelines. Currently who qualifies for an FHA loan is dictated by the nervous investors on the secondary market who have raised the bar to an unobtainable height. If this isn’t addressed there will never be a true recovery.