Fannie Mae-No Politics (FNMA)

[Robert from yahoo bd]

https://finance.yahoo.com/news/turned-american-dream-home-ownership-214934632.html

"First-time buyers are particularly feeling the pain: They comprise 31 percent of the current market, down from 38 percent in 1981; but the average age of repeat buyers now stands at 58, up significantly from 36 in 1981, according to the National Association of Realtors."

"Sam Chandan, director of the NYU Stern School of Real Estate Finance, testified before Congress last year that institutional investors account for only 2.5 percent of all home sales nationally, citing data from Freddie Mac.

“It’s an incorrect assessment, in my view, that the institutional investors are driving prices nationally,” Chandan told CO. “It is simply not supported by the data.”

“For the overwhelming majority of U.S. households, homeownership is the route to wealth creation and intergenerational wealth transfer. Period.”

"When the Great Depression hit in the 1930s, the government looked for ways to prop up both a debilitated housing market and a severely wounded banking sector. President Franklin Roosevelt’s administration and Congress created the Federal Housing Administration (1934), which provides insurance for mortgages originated by private lenders, and the Federal National Mortgage Association (1938), known colloquially as “Fannie Mae,” which expands the secondary mortgage market by securitizing loans and selling them to investors.

Out of FHA and Fannie Mae, the 30-year mortgage was born. The innovation allowed homeowners to put down 10 to 20 percent of the home’s overall value and pay the rest off in monthly installments over a 30-year period."

"Things shifted dramatically within a generation: Homeownership rates have never dropped below 63 percent since 1965.

“That system worked perfectly from the 1930s to the mid-1990s,” said Hockett. “But we allowed these public agencies, Fannie Mae and FHA, to fall increasingly under the sway of private sector institutions, and those systems of home mortgage finance began to get into trouble once we privatized them and allowed Wall Street banks to bid up prices.”

Mortgage securitization — packaging different mortgages into a security, slicing them up according to risk, and selling the bond to investors — is universally viewed as the principal cause of the 2008 Global Financial Crisis (GFC). While poor underwriting standards and misguided federal legislation helped inflate the early-2000s housing bubble, a three-decade buildup of mortgage securitization laid the foundation for a once-in-a-century financial panic that exploded across Wall Street and nearly took the entire system down with it.

“There’s just so much money to be gained that it makes sense for these systems and elaborate secondary markets to have been created to support homeownership,” said Perry. “Government provides incentives for homeownership, and in the private sector there are these overlapping entities — homebuilders, mortgage brokers, real estate agents, insurers, investors — that it’s very much a cornerstone of the U.S. economy.”

“[The affordability] issue is largely the result of not building enough housing, but it’s been compounded tremendously by the distortions the Fed created by its zero-interest-rate policy [ZIRP] and quantitative easing [QE],” said Pinto. “They drove interest rates below 3 percent, needlessly, and that created a refinancing boom which has locked people into 2 percent and 3 percent rates, so people don’t want to move, and in the meantime rates have doubled.”

"Several senators and representatives in Washington are attempting to forge a legislative compromise. Rep. Khanna’s “Stop Wall Street Landlords Act” would prohibit Fannie Mae, Freddie Mac and Ginnie Mae from purchasing and securitizing mortgages purchased by private firms that use debt to buy and rent them out for profit. The bill has several Democratic co-sponsors in the GOP-controlled House.

“This is a real issue,” Khanna said. “Ordinary people are talking about this, how they can’t buy a home because Wall Street is buying up their neighborhoods.”

"Utah Republican Sen. Mike Lee’s “HOUSES Act” would allow state or local governments to purchase millions of acres from the federal Bureau of Land Management and open those tracts to residential real estate development as they see fit. The bill has several GOP co-sponsors.

Professor Ghent is wary of Sen. Lee’s plan, mainly because so much federal land is in undesirable pockets and away from employment centers. Rather, she points toward state-level housing reforms as being the best hope to make local governments approve more single-family and multifamily housing through zoning measures.

“The low-hanging fruit is state-level reform,” she said. “Cities are kind of hopeless. They don’t have expertise, and they’re so beholden to local interests.”

Regardless of where the solutions come from, it’s clear some elected officials are now awake to an American Dream that is starting to feel like a nightmare.

“Americans aren’t serfs,” said Khanna. “We didn’t fight a revolution in this country just so we have to pay rent to Wall Street because they own all the homes.”