Tags: Sanders | reform | Fannie | Freddie

George Mason’s Sanders: Reform Fannie, Freddie to Resuscitate Housing Market

By    |   Friday, 18 May 2012 07:30 AM

The government-sponsored mortgage agencies Fannie Mae and Freddie Mac played a major role in the housing crisis and must be reformed to get the market back on its feet, says Anthony Sanders, professor of real estate finance at George Mason University.

Already the U.S. government has pumped $170 billion into Fannie and Freddie to keep them afloat.

“As Congress struggles with the decision to perpetuate them in some form or pull the plug on them, losses will continue to mount,” Sanders writes in U.S. News & World Report.

Editor's Note: Google Banned This Video But You Can Watch it Here

“Specifically, if the administration's recommendation for principal reduction for borrowers is adopted by the Federal Housing Finance Administration (FHA), Fannie and Freddie's regulator, losses to Fannie Mae and Freddie Mac would be in the billions.”

As for solutions, “U.S. lenders could hold the mortgage equivalent of a taxi medallion where the lender can use the government mortgage guarantee,” Sanders writes. Currently such “medallions” are held only by Fannie Mae, Freddie Mac, and the FHA

A wholly private market would be ideal, but that’s not feasible yet, Sanders says. “The idea would be to scale down the guarantee over time and let the private market return.”

Meanwhile, the delay in legislation to reform Fannie and Freddie is hurting the housing market by restricting loans, Federal Reserve Governor Elizabeth Duke said in a speech Tuesday.

“Uncertainty about the future on the part of lenders is inhibiting investments” in mortgages, she said.

Editor's Note: Google Banned This Video But You Can Watch it Here




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