This is a big article, Maxine Waters is a representative on the Financial Services Committee in congress and she has been very pro Fannie and Freddie, this article shows that. She's among several outspoken supporters in congress... I'm telling you dude, all signs point to money in the bank. There are no other options to save home ownership than to release them from government control.
Maxine Waters: ‘We are a long way’ from Fannie, Freddie reform
WASHINGTON (MarketWatch) — It’s been almost seven years since mortgage-finance giants Fannie Mae and Freddie Mac were placed into conservatorship, and U.S. lawmakers have yet to pin down how to reinforce the housing market’s infrastructure, without disrupting sales or putting taxpayers at risk.
Discussions over housing-market reform are difficult — the topic is complex and there are fundamental disagreements over the role for government.
“We have not been able to figure it out. It’s just not easy,” California Rep. Maxine Waters, the top Democrat on the U.S. House Financial Services Committee, told MarketWatch. “We are a long way from making any decisions about reform of Fannie and Freddie.”
Proposals to restructure the housing market touch close to the heart of families across the country. Fannie FNMA, +0.46% and Freddie FMCC, +0.48% together back about half of new home mortgages, and no lawmaker wants to be known for getting housing reform wrong.
Meanwhile, some may see inaction as tempting. Because of a bailout agreement with the federal government, Fannie and Freddie have now sent the U.S. Treasury a total of about $231 billion, about $43 billion more than the firms received in aid. This arrangement has led to shareholder suits, which claim that the government is unfairly taking private capital.
Read more: AIG ruling was helpful, says major Fannie, Freddie investor
MarketWatch spoke with Waters about the housing market, the role of Fannie and Freddie and the companies’ regulator, the Federal Housing Finance Agency. This transcript has been edited for clarity and length.
MarketWatch: The U.S. economy and the housing market seem to be recovering without replacing Fannie and Freddie. Since Congress is divided, what’s wrong with keeping the status quo?
Waters: The discussion continues about Fannie and Freddie. There are those who say let’s keep the status quo. And, of course, there are those who say that there have to be some reforms in Fannie and Freddie.
Of course, Fannie and Freddie look pretty good. Not only have they been performing well, but they have paid back all of the money to the Treasury and they continue to earn money. So that makes them look very, very good.
I believe that it is important to have something in place that will ensure that we have a secondary market, something in place to ensure that we are able to provide homeownership opportunities for the average person who is working every day and who can afford to pay a mortgage, people who have demonstrated that they pay their rent on time, they pay their utilities on time.
We cannot leave them to not be eligible for support from something like Fannie and Freddie. So I’m not supportive of those who say the private market can do all of this.
MarketWatch: So you are not ruling out, for instance, keeping Fannie and Freddie in something close to their current form?
Waters: Personally, I don’t rule out anything.
MarketWatch: If home prices fell, if mortgage defaults went up, with Fannie and Freddie unable to keep and maintain a certain amount of capital, doesn’t that mean that eventually that they will have to draw from the Treasury?
Waters: No. As a matter of fact, when you started this conversation, you talked about the recovery in the housing market and how well Fannie and Freddie were doing. I like that conclusion. That’s how we see it.
We see that there is a need for housing in this country. As a matter of fact, I was recently just reminded by my staff that there is a need for about 8 million new housing units and 43,000 of them are in my district alone.
I think the housing market needs to be serviced and that Fannie and Freddie appear to be able to do that. I don’t anticipate Fannie and Freddie accruing such debt that somehow they are going to be in the position where they have to borrow money from the Treasury.
MarketWatch: Your constituents are facing some of the highest housing costs in the country. Do you have federal policies to address their plight?
Waters: Housing prices are determined by demand. If the housing is available, the prices are reasonable.
When you have tight markets and there is not enough housing to serve the needs, the prices are going to go up. So the answer to that is the Housing Trust Fund, for example, that would create more affordable units. The question is you’ve got to develop and create more units for people to be able to rent, and, of course, the same thing with the housing market.
The federal government, as a matter of fact, can only help meet the demand through support for housing through ways like we’re describing – the [Federal Housing Administration], or whether it’s a housing trust fund, etc.
MarketWatch: In fiscal 2014, the U.S. Justice Department recovered $3.1 billion for false claims on federally insured mortgages and loans, and many big lenders say this is one reason they are skittish to make FHA loans. Has the DOJ been too aggressive in pursuing mortgage lenders under the False Claims Act?
Waters: No, as a matter of fact, the DOJ has a responsibility to protect the taxpayers’ money. So whatever they do to ensure that false claims are dealt with is what we expect them to do. It’s not a matter of being too aggressive. It’s a matter of simply doing your job.
MarketWatch: What can Congress and the rest of the federal government say to lenders to encourage them to ease standards and to lend more?
Waters: What you need in order to expand homeownership is secondary markets. You really do need, No. 1, lenders who are prepared to now follow the Dodd-Frank rules and to have qualified mortgages for people who demonstrate the ability to repay. For those who are initiating those loans, if they need to have support in the secondary markets for those loans, they need to have a place to go. Fannie and Freddie have been that place. So that’s what we need. We need support by our government to ensure that average working middle-class people can afford homes.
MarketWatch: You have repeatedly called for principal reduction on mortgages. Are you disappointed that the FHFA’s current director, Mel Watt, has not embraced principal reduction?
Waters: We are waiting to see what Mel Watt is going to say. I still support principal reduction, and I am hopeful that he is going to announce what he’s going to do about that sometime very soon. I have not yet concluded that he is not going to do it. He has not done it to date, but I support principal reduction.
MarketWatch: If he announces a plan that’s very targeted, very niche, for only a certain set of borrowers, what will your thoughts be on that? Do you think there needs to be a more far-reaching plan?
Waters: A plan should be well thought through. We do have to consider, if, in fact, we have concluded that there were certain targeted areas that were basically solicited for these exotic mortgages and fraudulent mortgages that got them in trouble, I think that certainly should be high on the consideration for principal reduction.
MarketWatch: The nation’s big lenders are pulling back from the mortgage market. Smaller, less regulated, nonbank lenders are increasing their share of lending. Do you think this is a healthy development for the mortgage and housing markets?
Waters: I love community banks being in this business. I hope community banks expand their mortgage possibilities. I have nothing against anybody who wants to play and play fairly. But, of course, it wasn’t the small banks that created the subprime meltdown and the crisis. It was some of our biggest banks.
MarketWatch: And what about the nonbanks?
Waters: I have to watch nonbanks. There’s money in certain areas that should be assisting in the housing markets, but I have to make sure that they are not participating in ways where they have mortgage rates that are too high or other kind of criteria that got us in trouble in the first place.
http://www.marketwatch.com/story/maxine-waters-we-are-a-long-way-from-fannie-freddie-reform-2015-07-09
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