Mortgages Blog

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I didn't make it to yesterday's housing finance conference in Washington, but I had eyes and ears there: Christopher Cruise, a mortgage loan officer trainer, erstwhile loan officer, and part-time journalist. After the conference, Cruise caught up with Bill Gross, co-chief investment officer of PIMCO, the giant bond fund.

In opening remarks, Gross had said that Fannie Mae and Freddie Mac should be consolidated into a revamped Ginnie Mae, the Government National Mortgage Association. Cruise asked Gross to expand on that comment.

"I'm a realistic observer or prognosticator that knows that they won't exist at some point," Gross said of Fannie and Freddie, "so why wait? It's just like a bad marriage. Do you string it out for five years and then get a divorce, or do you get a divorce almost immediately?"

Fannie and Freddie debt is equivalent to Treasury debt, and the markets would benefit if policymakers acknowledged that reality explicitly, Gross added.

Gross said he realizes that the underwriting standards differ among Fannie, Freddie and the Federal Housing Administration. Those standards would continue to differ even after those agencies (and the VA, too) were rolled into a transformed Ginnie Mae. "To have this government function separated in four, five, six different areas seems to me idiotic," Gross said. "Why not bring it all together and form one giant (organization) that, in effect, guarantees a significant portion of housing finance?"