WASHINGTON (February 11, 2011) — The Obama Administration’s call for a new secondary mortgage market structure must still ensure home owners have access to affordable mortgages no matter what happens in the housing market or where they live, according to the NATIONAL ASSOCIATION OF REALTORS®.
The government must continue to support housing finance even when private-market companies pull out, NAR believes. “The new system must involve some government presence, outside of FHA, USDA, and the Department of Veterans Affairs, to ensure a continued flow of capital to housing markets during economic downturns when large lenders flee the housing market,” said NAR President Ron Phipps, in response to the plan released today by the Obama Administration for reforming the housing finance market.
Any new system must also protect taxpayers from an open-ended bailout, he added. “NAR believes that we can’t restore the former secondary mortgage market with entities that took private profits while pushing losses onto the taxpayer,” Phipps said.
A system dominated by a few large banks that are “too-big-to-fail” would involve huge taxpayer risk of another bailout. “An efficient and adequately regulated secondary mortgage market must make available to consumers simple yet safe, reliable mortgage products like the 15- and 30-year fixed-rate mortgages,” said Phipps.
The size of the government’s participation in housing finance should decrease if the market is to function properly, but when private capital fled the marketplace during the recent financial crisis, government backing of residential mortgages was critical in sustaining the housing market, he added.
“Without government support, the financial crisis could have been far worse,” Phipps said. NAR’s economists estimate that a retreat of capital from the housing market will negatively impact the economy, because for every 1,000 home sales, 500 jobs are created for the country.
Another secondary market proposal — raising fees for current well-qualified consumers to cover losses stemming from mistakes made in the private business decisions of the former Fannie Mae and Freddie Mac — drew criticism from NAR.
“Reducing the government’s involvement in the mortgage finance market is necessary for a healthy market, but shouldn’t come at the expense of the economy or home buyers,” said Phipps. “Any proposal for increasing fees and borrowing costs beyond actuarially sound levels will only make it harder for working, middle-class individuals to achieve home ownership, and only the wealthy will be able to achieve the American dream.”
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