This is a copy of Mathan22's letter:
My email to Director Watt
Dear Director Watt,
I am writing this letter to you as a law abiding citizen, a tax-payer, a national mortgage licensed residential loan officer and most importantly an investor in the United States of America.
The first issue I would like to address is in regards to the amount of time and energy, which in my opinion, is being inappropriately spent in designing a plan to reform an already well functioning GSE market. The processes by which Fannie Mae and Freddie Mac use to purchase funded loans that are originated by lending banks and institutions does not need resolution and should not be made scapegoat to issues that surfaced 5 years ago. In fact, Fannie Mae and Freddie Mac have been the financial resource for all lending banks as a means to remain liquid in originating 30 year fixed mortgages for our fellow Americans. Fannie Mae and Freddie Mac have been the victor in many settlements against the financial institutions that sold non-performing loans to them. With that said, the GSE’s could be viewed as the heroes of the market for being a resource for the troubled banks that needed to sell the non-performing loans and have those loans come off their books to remain in business. Since 2009, the administration has implemented some programs such as the Home Affordability Refinance Program that has allowed these non-performing loans to be refinanced by homeowners into programs that are now very strong, profitable and performing.
It is my opinion that the focus of Congress needs to sway from replacing Fannie Mae and Freddie Mac to reforming and revisiting how the United States regulates the types of loans that the banks are selling and the types of loans that are being sold to the two GSE’s. Congress should also focus on additional ways that banks remain insured and well capitalized in case they originate non-performing loans in the future and sell them to the GSE’s. Congress should focus on how to back-stop banks in case they need to buy back the non-performing loans. Banks should remain responsible and liable for selling non-performing loans to Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac should not be held responsible for irresponsible originated loans by the financial institutions.
Replacing Fannie Mae and Freddie Mac does not help prevent a future crisis. An attempt to create a new entity like FMIC, new GSE or secondary market will do nothing but create a new set of institutions to purchase the same loans that will be funded by banks in the future. Fannie Mae and Freddie Mac are performing just fine as and they have kept lending institutions liquid to lend to Americans. Do you feel Congress should spend their time and energy coming up with solutions to prevent the origination of non-performing loans in the future and should revisit ideas with solutions to help backstop and insure banks are not selling those loans to the secondary market? It seems so simple, yet it still feels like the focus of the real issue is missed and not understood.
The second issue I would like to address is the current conservatorship control that Fannie Mae and Freddie Mac are in. While I do agree that it was imperative that the government step in when there was some serious attention, it is in my opinion, time to release these companies back to the shareholders. It is ridiculous that the companies that helped in the aid and rescue of lending institutions be treated unfairly and with disregard to their shareholders. The GSE’s are the victors of many settlements for the acquisition of the non-performing loans from the lending institutions. That in itself gives credibility to the fact Fannie Mae and Freddie Mac were indeed made victim of the lending institutions that originated the non-performing loans were the ones that contributed to the financial crisis.
The same banks and institutions that originated the non-performing loans and received the TARP bailouts were allowed to pay back the TARP monies owed back to the government. Since then, the banks have been allowed to operate as publically traded companies without being subjected to government control. Fannie Mae and Freddie Mac have now paid back more money than they were “required” to take when originally put in conservatorship. I understand there are lawsuits filed as Fannie Mae and Freddie Mac are being advised by FHFA that the $189 billion they paid back does not count towards repayment according to a one sided amendment created in 2012. This is unlawful in many regards. I think you would agree.
Let me pose this question; How do you think Bank of America, JP Morgan Chase, Wells Fargo and all other Banks that received the TARP bailout funds would feel if they were told by the United States that the TARP funds they repaid did not count towards repayment, that their board of directors would have no say on how the companies operated, that all their profits would be taken by the US Treasury and used to pay down the US Deficit indefinitely? I doubt this would fare well for the economy, the shareholder’s of those institutions and the operations of our systems in place. Similarly, it is not right that these two privately held companies (Fannie Mae and Freddie Mac) that have repaid monies in the same regards that the banks and insurer’s like AIG be treated any differently.
I urge you help Congress and the Administration to set a new American Precedence and do right by our country. Let’s uphold the foundation and principles to what our forefather’s set when they wrote the Constitution and amendments to it. Let’s do right by the Rule of Law and what is ethically and morally right; Release Fannie Mae and Freddie Mac from conservatorship, allow the money that was paid back be regarded as payment in full and come up with new ways to regulate and insure that banks are upholding good lending practices so the GSE Market that has been in place for over 70 years continue to function in a healthy manner.
Respectfully,
