Treasury Secretary Timothy Geithner called for changes to be made in the U.S. mortgage market at a recent press conference. He didn’t announce any regulatory deadlines or strategies, though. However, it is anticipated that he will be telling Freddie Mac and Fannie Mae to get their houses in order within the next year. Geithner also admonished that the U.S. cannot afford to pick the tab up for them again.
Geithner hasn’t declared a strategy
There isn’t a plan for what to do with Freddie Mac and Fannie Mae. Geithner was basically announcing a mission statement, and there were some things he made clear. Freddie and Fannie cannot be back to business as usual and can never act as they did before the housing meltdown. He also highlighted that the two mortgage giants would not be allowed to try to outmuscle the private market again. He stressed, according to Reuters, that the mortgage industry is not sustainable as it currently stands.
No consensus yet
Housing industry insiders’ and economists’ opinions vary, as they often do, on how best to reform the housing industry. Geithner did advocate retaining mortgage underwriting through Fannie and Freddie, as government backing for mortgages is a practice that all industrial nations participate it. Others, such as co-founder of Pacific Investment Management Co. Bill Gross, contend that completely nationalizing the housing industry is required at this point. The investment impresario, according to Businessweek, says that the private market can’t mount much, if any, of a comeback at all by this point.
Something does need to change
The strategies for what to do may vary, but few disagree that something has to change with Freddie and Fannie. The government has already, according to NPR, spent $150 billion on the mortgage houses. Thus far for this year, 89 percent of all mortgages in the US were underwritten by Fannie Mae, Freddie Mac ore Ginnie Mae. Ginnie Mae, unlike Freddie and Fannie, is completely part of the U.S. Government and doesn’t lend mortgages but sells mortgage backed securities on only certain types of mortgages lent in the U.S.
More information on this topic
Business Week: http://www.businessweek.com/news/2010-08-17/gross-urges-full-nationalization-of-housing-finance.html
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