Real Estate News
Housing Finance Reform Conference Not a Funeral for Fannie and Freddie
- by Jeff Hernander -
President Obama's administration held a conference today to discuss the future of mortgage giants Fannie Mae and Freddie Mac, who, despite their apparent failure, are still vital to the recovery in the housing market moving forward. Treasury secretary Tim Geithner talked about the conference being more than just a symbolic funeral for Fannie Mae and Freddie Mac, as some have referred to it. He also said that the country needs to engage in a vigorous debate over the government's role in the future of housing finance. The good news is that with things the way they are, it appears we have plenty of time for that debate.
The housing market is in horrible shape. The end of the $8,000 federal tax credit for first-time buyers has brought another downturn and there's very little in the way of comforting news to cushion the blow. New housing starts fell sharply in June and new permits for construction, an indicator of future activity, fell also. Some economists are even predicting a double-dip recession or a dreaded Japanese-style “lost decade”.
But despite, Fannie and Freddie's apparent flaws, experts say we need them to move forward as they are the government's primary tools to provide support for the market. The future, unfortunately, does not look bright. Unemployment is at near-record levels and appears likely to stay there for awhile, there are no more federal stimulus programs on the horizon, and the Federal Reserve has been late in addressing the need for stronger action.
Most economists agree that at best Fannie Mae and Freddie Mac should eventually be converted from tools of policy into institutions that do not bleed American taxpayers when housing goes south. But, for now, they remain vital to the recovery in the market. The two companies currently insure more than 80 percent of all mortgages in the US.
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