President Obama’s recent remarks on housing got a lot of media play. And while a lot of his remarks seem like warmed-up leftovers to those who follow the industry, there were a couple of interesting things a little farther down the prompter.
His advocating simplifying overlapping regulations (meaning the QM and QRM regs, which even have overlapping initials) was well received, but there was no mention of specifics. Having the private sector more involved in mortgages and limiting government risk, also no real specifics.
The likeliest thing to happen is that no matter what private structures get set up, come a catastrophic loss, the taxpayers will be picking up the tab, again. (Look at what happened with the subprime conduits after the two market drops.)
So the best thing may be to look at which of the taxpayer-supported approaches is best. The public-private partnerships enjoyed by Freddie Mac and Fannie Mae before their nationalization aren’t it. The thirst for profits for shareholders trumped the interests of taxpayers before, and could again.
But what about a Ginnie Mae-like structure? Ginnie Mae has been a consistent moneymaker for taxpayers, and its allied Federal Housing Administration has never been a burden on taxpayers, though let’s not get complacent about that. It still may.
Merging Freddie and Fannie with a Ginnie Mae structure and separating the two by having FHA keep its traditional lower-income and first-time buyer focus with a combined Freddie-Fannie taking the “moderate” piece might be worth trying.
The president had a couple of interesting points in his remarks. One was to boost the construction industry, by tearing down ramshackle housing on vacant properties.
Now that the new-home market is coming back, creating construction jobs would benefit not only housing but the economy as a whole.
He also tied housing to immigration reform. More people buying houses will equal rising home values, he said.
So to review, it’s good that the president addressed the housing issue after so much delay and indecision. Some of the things he said lacked the specificity that would allow us to judge whether there’s something of substance here or just smoke and mirrors. But he also had a couple of proposals certainly worth looking into.
