Government may be forced to stay in mortgage business

New York /
Jun.June 20, 2011 12:41 PM

A dicey start to the spring housing season has raised the prospect that the government will remain dominant in the mortgage market for longer than intended, the Wall Street Journal reported. The fragility of the market, falling prices and reduced consumer confidence are making it difficult for Washington to pull back its support.

Government-sponsored organizations Fannie Mae and Freddie Mac must try to return to sound lending standards without cutting off access to mortgages completely, according to the Journal. Taxpayers are on the hook for $138 billion since Washington took over control of the organizations in 2008, a loss that it cannot walk away from.

“We’re not going to get a recovery in housing until the average borrower can get a mortgage,” said Kenneth Rosen, a California-based economist.

Some experts are championing the return of private investment as a means to curb the government’s role. Obama administration officials are pushing to increase fees to lenders and reduce the maximum loan size eligible for government backing. Those limits are set for a minor decline in September.

There are flaws to this rationale, however. “I’m sort of a champion of private capital, but I’m also not naïve,” said Lewis Ranieri, a pioneer of the home mortgage bond market. “At this point, it really doesn’t work because we don’t have fundamental issues resolved.” [WSJ]


Related Articles

arrow_forward_ios
Residential Real Estate, Housing Market, Fannie Mae
Sentiment sinks deeper as market sidelines buyers and sellers
Sentiment sinks deeper as market sidelines buyers and sellers
Equifax CEO Mark Begor (Photo Illustration by Steven Dilakian for The Real Deal with Getty Images)
Equifax error might have harmed (or helped) mortgage applicants
Equifax error might have harmed (or helped) mortgage applicants
314 Wilson Avenue in Bushwick, Pennrose Holdings' Mark Dambly (Pennrose Holdings, Hope Gardens)
Pennrose, Acacia land $117M Freddie Mac loan in Bushwick
Pennrose, Acacia land $117M Freddie Mac loan in Bushwick
(iStock)
Mortgage rates falling back toward 5%
Mortgage rates falling back toward 5%
Fannie Mae's Doug Duncan (Fannie Mae, iStock)
Optimism continues slide among would-be homebuyers
Optimism continues slide among would-be homebuyers
A photo illustration of a crystal ball predicting future home prices (iStock)
Home sales, building to slow: Fannie Mae
Home sales, building to slow: Fannie Mae
(iStock/Illustration by Kevin Rebong for The Real Deal)
Existing-home sales leapt 6.7% in January
Existing-home sales leapt 6.7% in January
Fannie, Freddie to buy mortgages up to nearly $1M
Fannie, Freddie to buy mortgages up to nearly $1M
Fannie, Freddie to buy mortgages up to nearly $1M
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...