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Home loan conference recap

By Holden Lewis ·
Wednesday, August 18, 2010
Posted: 10 am ET

Mortgage maven Christopher Cruise summarizes yesterday's housing conference in D.C.:

My overall impression of the conference is that there will be changes and that maybe, maybe sometime in the next decade or so, Fannie and Freddie will cease to exist, or their functions will be split and half-retained in government and the other half fully privatized. The quasi-public/private role that they played for many years seems to be dead as a doornail. No one seemed to be receptive to that model being revived.

Whatever changes there are will be incremental and evolutionary. I didn't get the sense that the fix was in, that Treasury had already decided what to do about Fannie/Freddie, although it was pretty clear that eliminating them was not going to happen, at least not anytime soon. I don't think anyone wants Fannie/Freddie killed immediately, although it is clear that many believe the companies were poorly run in their final years.

The Obama Administration must report to Congress by January 2011 on its plans for Fannie and Freddie, hence this conference as well as a request for comments a few months ago that drew 300 submissions.

HUD Secretary Shaun Donovan said government involvement in the housing market needs to be smaller. He seemed to think government should have some role, but did not indicate what that role would be or how large it would be.

There was a strong conservative point of view, articulated most-strongly by Alex Pollock of the American Enterprise Institute (see his writings on the subject at ) that Fannie and Freddie should be privatized. In his comments on a panel, Pollock called for a "private secondary market" that would "avoid market subsidies that increase home prices." He emphasized that the private/public model doesn't work.

Marc Morial, head of the National Urban League, reflected the liberal view that Fannie/Freddie should be preserved as government-sponsored enterprises, or GSEs. They "helped to create the American middle class," he told the gathering. He said "housing counseling and homebuyer education works."

Barbara J. Desoer, president of Bank of America Home Loans, was brief. She said the GSEs, if they survive, "should not hold mortgage-backed securities."

Brian Chappelle, a longtime industry observer, said "the housing recovery will continue to be stymied" until borrowers with FICO scores between 620-720 can get mortgage loans.

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August 25, 2010 at 12:55 pm

Until the whole employment (or unemployment) thing gets "figured out", a great deal of these discussions don't matter as much as those involved would like to think.

August 19, 2010 at 10:40 pm

For millions housing security is still a disaster, and loan modifications don't seem to be in the cards for many. A little basic information could make the difference, like the free on-line class, "Loan Modification Explained in 15 Minutes", at