LEW SICHELMAN
THE MORTGAGE SCENE
Plugging Into The Idea Of Fannie, Freddie As Utility Companies Stalled reform, never-ending conservatorship. There’s really only one path to get the GSEs out fromunder the government. BY LEW SICHELMAN | CONTRIBUTING WRITER, NATIONAL MORTGAGE PROFESSIONAL
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rior to the housing meltdown and subsequent recession of 2008, it was hard to find anyone outside the real estate business who knew who Fannie Mae was. Most thought it was the popular (at the time) Illinois candy company, Fannie May. But with the housing debacle, the semi-private secondary mortgage market reached the public consciousness. You knew that was the case when she became the butt of jokes by the late night comedy hosts. And soon, Fannie and cousin Freddie Mac were placed into conservatorship, lest they take the entire economy down with them. Today, the two government sponsored enterprises, known affectionately within the business as “the agencies,” are thriving, earning millions upon millions. They’ve more than paid back what Uncle Sam put up to keep them afloat. Yet, though they are now extremely profitable, they remain under the government’s wing.
The hope once was that the Trump Administration would take the steps necessary to end the GSEs’ fiefdom. But that opportunity has come and gone. Apparently, the fact that the agencies’ profits were being swept into America’s general fund with hardly a blink or a wink was too much of a temptation for the White House to ignore. But in the waning days of DJT’s rain – I know the word is spelled reign, but to me, it feels more like rain, a heavy rain – The Treasury Department and Fannie and Freddie’s regulator, the Federal Housing Finance Agency, decided GSEs could retain more of their earnings as important capital rather than passing them on to the Nation’s coffers. The move, of course, denies the new Biden Administration the same privilege that DJT enjoyed, using the agencies’ earnings as it sees fit. And now it is left to the new President and his team to decide how to write an end -- the final chapter, if you will -- to an economic disruption that occurred a dozen years ago. Yep, that’s how long the GSEs have been in conservatorship.
REALTORS REAR UP It’s anyone’s guess at this writing what Biden has in mind, if anything. Any number of ideas have been
advanced. But one of the most intriguing – to turn Fannie Mae and Freddie Mac into public utilities – has been floated by the National Association of Realtors. Now, you might ask, why does NAR has anything to say about this vital topic? For starters, its 1.4 million members have just as much interest in the mortgage market as lenders, mortgage brokers, title companies and the like. If not more so. After all, without the sales they generate, there would be no need for financing. For another thing, NAR is the nation’s largest trade organization and one of the most powerful lobbies in Washington. So what it has to say is worthy of at least a look-see, if nothing else. And in a new, deeper dive that “fine tunes” the group’s on-going proposal to transform the agencies once and for all, Susan Wachter and Richard Cooperstein, argue that as utilities, Fannie and Freddie can continue their dual roles of utilizing private capital to protect taxpayers and fulfilling their charter mission to maintain mortgage market liquidity at all times and throughout the country, not just when the housing is strong and not just where it is strong. The proposal, says Wachter, a professor of finance and real estate at the Wharton School, and
As utilities, Fannie and Freddie can continue their dual roles of utilizing private capital to protect taxpayers and fulfilling their charter mission.
