Nooooo…not Fannie and Freddie
I know that the government already leaked the plan, but seeing it actually launched I can’t help but feel a little despair that the Obama Administration continues to use Fannie and Freddie to implement new housing policy. I wrote a column when the idea was first floated to help state and local housing agencies access financing.
Simply, all things Fannie and Freddie at this point – more than a year into the conservatorship – should be squarely focused on sorting out what exactly they’re suppose to be. It seems absurd that they continue to operate in limbo given their enormous role in the housing market and credit markets. Either nationalize them, privatize them or unwind them, but don’t give them new tasks to perform.
If housing agencies need financing, then give them a grant or backstop their municipal debt. It’s more honest and efficient than the mind bending program launched today.
The Treasury said it will purchase securities issued by Fannie and Freddie that are backed by new mortgage revenue bonds from the housing state and local housing agencies (HFAs). Treasury said the bond program can support “several hundred thousand” new mortgages for first-time homebuyers in the coming year, as well as refinancing “at risk” borrowers into more affordable loans.
The plan also aims to help jumpstart the private lending market for the state and local agencies. Before using proceeds of new mortgage bonds under the program, the state and local housing agencies must sell debt to private investors equal to 40 percent of the total amount borrowed via Fannie, Freddie and the Treasury.