Saving FHA

Andrew Harrer/Bloomberg

WE’RE HEARING there is a growing consensus that Fannie Mae and Freddie Mac should be wound down and replaced with a new system that relies more on private capital than government guarantees. Now President Obama has joined the parade.

“I believe that our housing system should operate where there’s a limited government role and private lending should be the backbone of the housing market,” the president told an audience in Phoenix.

The president went on to endorse a bipartisan effort lead by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., to replace Fannie and Freddie with a new federal insurer. Under the Corker-Warner approach, private insurers would take the first loss before federal catastrophic insurance would kick in.

“Private capital should take a bigger role in the mortgage market,” the president said. “I know that sounds confusing to folks who call me a socialist. But I actually believe in the free market.”

The president may believe in the free market but not enough to drop the safety net.

He wants to preserve the 30-year fixed-rate mortgage and ensure that FHA, VA and Rural Housing guaranteed loans are still available after Fannie and Freddie are in their graves.

The president also wants FHA to take on a larger role during the rest of his term in office.

HUD secretary Shaun Donovan is working on a new program to provide FHA financing to borrowers who lost their jobs but are now back at work and on the mend.

Obama’s “Back to Work” initiative will provide “creditworthy re-employed borrowers with strong recent pay histories” access to FHA-insured financing, according to a White House fact sheet on the president’s housing policies, which he outlined in his Phoenix speech.

“We should give well-qualified Americans who lost their jobs during the crisis a fair chance to get a loan if they’ve worked hard to repair their credit,” the president said. Supposedly, HUD can launch this Back to Work lending program without seeking congressional approval.

The Obama administration will be calling on Congress to pass legislation that would allow Fannie, Freddie or FHA to refinance underwater loans that have been pooled in private-label securities.

This initiative would provide a HARP-like refinancing program for struggling homeowners in places like Richmond, Calif., who are turning to eminent domain as a way to condemn and seize private-label mortgages so they finally can be restructured and made affordable.

The president’s refinancing program could save those borrowers up to $3,000 year. Obama originally proposed this PLS refinancing program in 2010 but Congress ignored it. Washington pundits expect Congress will give it the same cold shoulder this time around.

HAIL TO THE CHIEF: Our posters at http://www.mortgagegrapevine.com have surprised us by conducting an on-the-level discussion of President Obama’s recent speech on housing. There’s only one F-bomb in it (don’t click the link if that offends you). We thought it was actually a pretty murky speech rehashing old principles back before the government punted on Freddie Mac and Fannie Mae reform years ago. Let’s face it, the taxpayers are going to be on the hook again for any catastrophic loss. Any new industry structure will be dismantled between a Friday and a Monday if the walls are tumbling down!

MOST READ/MOST EMAILED: The most read content on our site this week was Evan Nemeroff’s report that renters would rather be homeowners. This is kind of comforting considering the suggestions there would be some paradigm change and Americans would eschew homeownership. Not going to happen! The most emailed item is also by Evan, on Bank of America’s recent trouble with RMBS not from its bucket of Countrywide waste.

BLOG OF THE WEEK: “To Thine Own Selfie Be True” continues Garth Graham’s comparison of some mortgage industry behavior to that of teens relentlessly snapping photos of themselves with their cellphones and posting these “selfies” to the Internet. (Note that Anthony Weiner’s brand of selfie is not under discussion here.) Garth notes bemusedly that the selfie comparison has gotten him more comments even than for the blog where he compared some in the industry to plumbers’ butts (a crack that resonated for a good long while in the hearts, if not the butts,  of industry leaders).

SHAMELESS SELF-PROMOTION: Both of the august writers of this blog will be in the same place at the same time next month, so be sure to come on by and say hello! The venue is our third annual Mortgage Regulatory Conference, to be held Sept. 23 and 24 in Arlington, Va., just across the Potomac from the capital district. This year again we are co-located with the bank reg conference sponsored by our sister pub, American Banker. You can pick any session in the two shows to go to. Anything interesting going on now in the world of mortgage regulation? Just maybe.

Mark Fogarty is editorial director of the SourceMedia Mortgage Group and has been commenting on the mortgage market since 1984. Brian Collins is the group’s senior editor and D.C. bureau chief. He has worked the mortgage beat since 1988.