RIP Fannie & Freddie? Struggling Loan Programs Will Impact HOAs

 One of the biggest issues in the real estate industry over the past year has  been the speculation that government-sponsored mortgage programs Fannie Mae and  Freddie Mac will be ending. For the past 70 years, Fannie Mae and Freddie Mac  have helped countless Americans secure long-term, fixed-rate mortgages, by  purchasing them from lenders and securitizing them, all with the unofficial  guarantee of the federal government backing them up.  

 Both saw their own corporate finances collapse two years ago, amid the housing  and credit crisis, and that led to the Obama administration calling for their  end. During the 2008 financial crisis they collapsed into government  conservatorship as a massive number of loans in its vast $5.6 trillion  portfolio started to fail.  

 “We need to wind down Fannie-Freddie and substantially reduce the government’s footprint in the housing market,” Treasury Secretary Timothy Geithner announced in February of last year. “And that’s a process that has to happen gradually, because they are now the dominant  source of housing finance, and we want to be careful that that process happen  in a way that doesn't interfere with, or impede, the process of repair in the  housing market.”  

 The Treasury’s plan is committed to doing this over a term of five to seven years, putting in  place new regulations, which will allow the private sector to replace the  government involvement in the housing market.  

 Most industry professionals believe that Fannie and Freddie became scapegoats for the housing market meltdown. However, Peter J. Wallison, an attorney and the Arthur F. Burns Fellow in  Financial Policy Studies at the American Enterprise Institute, specializing in  financial market deregulation blames Fannie Mae for the crisis, in large part  because the corporation bought a lot of private-label securitizations as a way  to meet targets for putting money into affordable housing. This we know did not  work as planned. As such, the FHA has had to take the lead in the origination of home loans, whether to  purchase, refinance or for home improvement.  

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Comments

  • Ken Simonson, chief emiconost for the Associated General Contractors of America and the NABE's point person on the survey. The tone of the overall survey, he said, was extremely gloomy.