Much to the surprise of many pundits, the recently signed Financial Reform Bill did not outline guidelines for regulators to begin crafting the future of Fannie Mae, Freddie Mac, and Ginnie Mae. Although this was viewed as an oversight by most, it was the right move because it will allow our political and financial leadership to focus on repairing the mortgage finance system. Remember that the government loan programs Fannie, Freddie, VA and FHA loans maintain nearly 96% of the mortgage market-share yet they are exempt from most of the financial reform repercussions.
In April, Treasury outlined their “Housing Finance Reform” objectives. The administration’s proposals will be designed to achieve four objectives.
- Mortgage credit should be available and distributed on an efficient basis to a wide range of borrowers.
- A well-functioning housing market should provide affordable housing options, both ownership and rental, for low and moderate-income households.
- Consumers should have access to mortgage products that are easily understood.
- The system should distribute the credit and interest rate risk in an efficient and transparent manner that minimizes risk to the broader economic system an does not generate excess volatility or instability
Demand for home loan financing has hovered near the 13-year low reached earlier this month, showing the lowest mortgage rates on record have yet to spur sales after the expiration of a government tax credit. It will take gains in employment and in consumer confidence to boost housing. “The housing market is weak,” Paul Anastos, president of Mortgage Master Inc., a Walpole, Massachusetts-based mortgage lender, said in an interview before the report. “There’s good opportunity out there in the housing market, but because consumer confidence is fairly low, people aren’t really shopping. They’re worried about other things, like jobs.”
