Very Informative Post By Mark Brian on the changes taking place in real estate.
Today, the Obama administration is staging the Conference on the Future of Housing Finance at the Treasury Department. It is going to be moderated by Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan in Washington, D.C., is billed as a first step toward housing finance reform. I have my doubts and would bill it as “How Can We Screw Up an Already Screwed Up Housing Market”. Geithner has said the Obama administration plans to offer “a comprehensive reform proposal” for the housing finance system including mortgage giants Freddie Mac and Fannie Mae by January. Fannie and Freddie don’t make the loans, but they do guarantee the loans made by others and purchase some loans for their own portfolios. Fannie and Freddie also extend credit to homebuyers by making financing available to lenders, and keep mortgage markets liquid by making mortgage purchases.
By extending credit with an implicit government guarantee, Freddie & Fannie do create a huge risks to the American taxpayers.The whole idea of Freddie & Fannie with a private profit and public loss structure, was flawed from the beginning. However, there is always going to be a need for some type of government involvement in the housing finance sector so that it remains viable in volatile economic times.
But to make changes right now is too risky considering the housing market has not recovered from the results of the last time the politicians monkeyed with real estate. And sadly, this is turning into another Republican versus Democrat spectacle. Don’t get me wrong! Considering that the government backed nearly 97 percent of U.S. mortgages in 2009, something needs to be done.
First, the Republicans went on the offensive by releasing a policy brief that blames everything that went wrong in the mortgage market on Fannie Mae and Freddie Mac, and everything that went wrong with them on Democratic lawmakers or company leaders, and on affordable housing goals Congress enacted in 1993. No real big surprise for politicians to blame everything on the other party or the previous administration. But I feel that most of the American people are tired of this behavior from the politicians and want change to Freddie & Fannie, but not by further destroying a fragile housing market. If the wrong steps are taken it could restrict credit, drive down home prices, increase foreclosures and slow the economy.
I have been rabidly following this and to tell the truth I do not have too much confidence in the politicians or policy makers to make things better. I have a sinking suspicion that this will turn into yet another way for the banks and large financial institutions to gain a stronger stranglehold on the financial system. Check out some of the panelists:
· Barbara J. Desoer, President of Bank of America Home Loans (Now owns the smoldering remains of Countrywide)
· Ingrid Gould Ellen, Professor of Urban Planning and Public Policy at New York University’s Wagner Graduate School of Public Service and Co-Director of the Furman Center for Real Estate and Urban Policy
· Bill Gross, Co-founder and Co-chief Investment Officer of PIMCO, is the manager of the world’s biggest bond fund at Pacific Investment Management Co.
· Lewis Ranieri, Chairman of Ranieri and Company, Inc
Gross and Ranieri developed the model for the private mortgage-backed securities market that was behind the rapid expansion of credit for U.S. homeowners.
· Mike Heid, Co-president of Wells Fargo Home Mortgage (Starting to wonder if the banks will be well represented on the panel?)
· S.A. Ibrahim, Chief Executive Officer of Radian Group Inc (Read carefully what they do)
· Marc H. Morial, President and Chief Executive Officer of the National Urban League (Good)
· Alex Pollock, Resident Fellow at the American Enterprise Institute (Read their vague description and it sounds like lobbyists for big business)
· Ellen Seidman, Ellen Seidman, Executive Vice President for Mission and Strategy, at ShoreBank Corporation , and Chair of the Board of Directors at the Center for Financial Services Innovation (both are out of Chicago..hmmm)
· Michael A. Stegman, Director of Policy and Housing for the Program on Human and Community Development of the John D. and Catherine T. MacArthur Foundation ( Good)
· Susan Wachter, Richard B. Worley Professor of Financial Management, Professor of Real Estate, Finance and City and Regional Planning at the University of Pennsylvania’s Wharton School (Good)
· Mark Zandi, Chief Economist of Moody’s Analytics (Meh..)
Look at the names on the list and think about who they want to have on the panel and why? I also notice that they do not appear to have anyone from NAR and that concerns me since REALTORS can contribute so much hands on experience and vast knowledge about housing and the current financing problems that consumers are facing when buying or selling real estate. Please also consider the reported criticism from affordable-housing advocates raising concerns that the Obama administration is excluding consumer and community groups from playing prominent roles in this conference.
And right now, Fannie and Freddie play a key role in the Obama administration’s efforts to fix the nation’s housing problems through various programs targeted at helping struggling homeowners. And that is a good thing in my opinion but how long can we keep propping up the housing market? Fannie and Freddie were placed under Treasury conservatorship in September 2008 due to the expected losses on their books from bad home loans but please remember who had the idea for loosening the lending standards: Politicians!
But I feel that we need a secondary mortgage market of some sort that includes some government participation & oversight, but that will protect the taxpaying hardworking average American and help to make sure that anyone with decent credit can get a mortgage so that they can buy a home!
I am not sure if I will want to watch but the event will be streamed live on www.treasury.gov. But my prediction is that we need to let our elected officials know that the housing market is far too important to the American economy for them to screw it up. And in many of the past economic downturns, it has been real estate that helped to get the economy rolling again!
Mark Brian Silver Star Real Estate Office 864-225-1883
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