Ten years and $187.5 billion ago, the federal government seized control of Fannie Mae and Freddie Mac. What did we get for the effort and money?
For one, American households had access to mortgage credit during the Great Recession. That alone was a remarkable success and likely worth the money, but that was not the only return on our national investment.
Risky mortgage products were prohibited while Fannie Mae, Freddie Mac, and their business partners were forced to meet high operational standards. Together, these reforms produced one of the most stable mortgage markets in our national history.
Which is why Congress is working on legislation to dissolve Fannie Mae and Freddie Mac and remake the national mortgage finance system from whole cloth.
All kidding aside, most observers (including CAI) agree the federal government should not directly operate the system lenders use to fund mortgage loans. This system should be fully paid for and managed by the private sector, subject to federal and state regulation.
As it turns out, this is much easier said than done.
Congress has debated how to “reprivatize” the mortgage finance system since September 2008, when the federal government put Fannie Mae and Freddie Mac in conservatorship. In 2013, legislation to do just this stalled and Congress has been incapable of restarting the great debate on the future of the mortgage finance system ever since.
But, something has changed.
Senator Bob Corker of Tennessee and Senator Mark Warner of Virginia have once again teamed up to jumpstart a debate on the mortgage finance system. The Senators propose to abolish Fannie Mae and Freddie Mac and transition to a private mortgage finance system supported by the federal government in only the direst of economic conditions (think worse than the Great Recession).
With the debate underway, what are CAI’s top concerns? We want the legislation to be consistent with our Housing Finance Reform Core Principles. In addition, we want Access and Accountability.
- Will community association homeowners have access to mortgage credit on reasonable terms and competitive prices in a mortgage finance system without Fannie Mae and Freddie Mac?
- Will state governments be empowered to hold mortgage servicers and mortgage lenders accountable for bad business practices like those that harmed associations in the Great Recession?
Answers to these questions will determine if CAI supports or opposes the legislation developed by Senators Corker and Warner and will be the measure used to evaluate other proposals.
Over the coming months, we’ll use this space to discuss why it’s important that association homeowners aren’t overlooked this debate. The community association housing model is unique and growing, and our mortgage finance system must reflect these realities.
In the meantime, please do look at the Corker-Warner draft legislation and send feedback and thoughts to firstname.lastname@example.org. We’d love to hear from you.
Dawn Bauman, CAE
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