House finance regulator mulls action on “eminent domain” mortgage seizures
Theyve also been lobbying Congress to allow Fannie Mae and Freddie Mac to become private companies again instead of liquidating them. Some lawmakers say that makes them more determined to act. Taking the path of least resistance and allowing the GSEs to again entrench themselves deeper and deeper into our system of housing finance would be irresponsible and foolish, Corker said in a statement. Its time to seize on the growing momentum to move beyond the broken Fannie and Freddie model. To contact the reporters on this story: Cheyenne Hopkins at Chopkins19@bloomberg.net ; Clea Benson in Washington at firstname.lastname@example.org To contact the editor responsible for this story: Maura Reynolds at email@example.com 30:16 Aug. 6 (Bloomberg) — President Barack Obama speaks in Phoenix about progress made in repairing the nation’s economy and housing market, and his proposals to help complete the housing recovery.
Five Takeaways on Housing-Finance Reform From Obama’s Town Hall
So what does Mr. Obama plan to do with the companies? Heres an overview: 1. Well get rid of Fannie and Freddie as they currently exist You cant have an institution in which the government is underwriting and guaranteeing all the mortgage lending thats taking place around the country and big profits are being made by these quasi private institutions, said Mr.
The use of eminent domain powers to restructure distressed mortgages has been debated by communities for more than a year and has been controversial with Wall Street banks and bond investors from the start. Alfred Pollard, FHFA’s general counsel, said in a memorandum posted on the agency’s website on Thursday that the uncertainty surrounding the use of eminent domain raises several issues, including its possible impact on the mortgage market and potential losses that Fannie Mae and Freddie Ma could incur. “There is a rational basis to conclude that the use of eminent domain by localities to restructure loans for borrowers that are “underwater” on their mortgages presents a clear threat to the safe and sound operations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks as provided in federal law,” Pollard wrote. The FHFA is weighing its legal options in any municipalities that approve loan restructuring programs. The agency is also considering preventing Fannie and Freddie from purchasing loans in those communities using eminent domain as a strategy for restructuring distressed mortgages.
Fix the mortgage finance system
After five years, though, there is movement toward reforming a big part of the system. At the moment, the market for new mortgages is almost entirely government-backed through Fannie Mae, Freddie Mac or the Federal Housing Administration. In Phoenix on Tuesday , Mr. Obama rightly argued that the situation must change, that private finance should again be the backbone of the system. He supported slowly but steadily winding down Fannie and Freddie, so-called government-backed enterprises meant to drive investment to mortgages, and replacing them with a more modest government role in the market.