The White House’s proposal today to shut down Fannie Mae and Freddie Mac and reduce the government’s role in housing finance brought swift response from the National Association of Realtors (NAR) and the California Association of Realtors (C.A.R). A portion of the text follows:
“The elimination of government involvement would raise borrowing costs for home buyers by severely restricting a safe and affordable flow of financing, making mortgages less available, and, ultimately, further impeding the still-fragile housing market recovery.
Congress needs to understand that during economic downturns, the housing market needs government involvement to ensure capital stability. History has shown the private market is incapable of supporting the mortgage financing demands of the nation’s home buyers during the hardest of times.
We can’t have a restoration of the old GSEs with private profits and a taxpayer loss system, but C.A.R. and NAR believe that Fannie Mae and Freddie Mac should be converted into government-chartered, non-profit corporations. This would ensure the government’s role in a stable real estate finance system, while eliminating the conflict created by the GSE’s current charter allowing for a private profit and public loss structure. With a clear explicit guarantee by the government, these entities would continue to be able to offer low interest rate loans onto home buyers and assure investor confidence.
Moreover, the White House’s proposal to allow the maximum loan limit to drop back to $625,500 in high-cost areas also would hamper California’s housing recovery. California dominates the jumbo loan market and cannot afford a reduced loan limit. Any reduction to the conforming loan limit will prevent low- and moderate-income home buyers in high-cost areas from accessing low-cost, low-rate mortgages.”
The debate around GSE reform is just getting started, and will continue for some time to come. In the meantime, C.A.R. and NAR will continue advocating for a strong government presence in the housing market.