Debating the Future of FHA, Fannie, Freddie

DEC 11, 2012 12:01am ET
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The final day of NAMB National featured what it called its Keynote Speaker Series. Kevin Finnerty of CSBS (substituting for Bill Matthews) lead off the day giving attendees at the Las Vegas show an update on the National Mortgage Licensing System

Zillow’s Spencer Rascoff was next, stating consumers are moving more and more to using tablets and smartphones in their mortgage search.

Ted Toser, president of Ginnie Mae, provided some numbers on the agency’s securitization program, including the fact that 48% of purchase transactions are being funded through this execution.

He also said that even though the Federal Housing Administration’s Mutual Mortgage Insurance Fund is at negative 1.44%, it doesn’t mean it will have to draw money from the Treasury.

The final speaker of the day and conference, Ed Pinto of the American Enterprise Institute, sees things a little differently.

In his presentation, he pointed out that 40% of FHA loans have what has been described as subprime mortgage characteristics.

That book of business is concentrated in certain neighborhoods and is having a negative impact on them. Pinto will be releasing a study on the issue later this week.

During the question and answer session, when someone said FHA is blaming its problems on seller-assisted low down payment mortgages, Pinto responded if the agency didn’t lose money on that program, it would have found something else to lose money on.

He continued FHA has a history of doing “dumb things” and the down payment assistance program was just the latest in a series of dumb things.

As for the future of Fannie Mae and Freddie Mac, Pinto said we are coming to a fork in the road but we don’t know which one to take.

If g-fees continue to be raised to get to their proper levels and regulators return FHA to its traditional mission so it won’t be an alternative, private money is likely to return to the mortgage industry.

The other alternative is that the government decides three years down the road legitimizes the nationalization of the two companies into what he calls Ginnie Mae 2. This would be bad because the government has shown it is incapable of properly pricing risk.

Comments (1)
On the loans that use Down-payment assistance. Has there been a study as to how many of these borrowers have lost their jobs as the main reason for the delinquency or foreclosure? Maybe we should go back to only approving the purchase price off of one income rather than two?
Posted by Zandra S | Tuesday, December 11 2012 at 4:02PM ET
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