Washington’s great housing failure

January 20, 2017 at 9:23 am Leave a comment

fanniemae The inability of Congress and the Obama Administration to decisively reshape housing policy is the single greatest piece of unfinished business in the financial sector with which the Trump administration must deal. The outcome of what promises to be a messy partisan debate could have huge implications for your credit union.

Predicting on September 6, 2008, when Fannie and Freddie were placed in conservatorship and taken over by the government, that they would not only survive the next administration but become even more integral to our nation’s housing market, would have been as foolish as predicting that Donald Trump would give up his gig as the star of Apprentice to successfully run for President. Get real.

But that is exactly what has happened. According to the GAO, from 2008 through 2013, the federal government directly or indirectly supported over three-quarters of the value of new mortgage originations in the single-family housing market. That same 2016 report concluded that “clarity on issues related to comprehensive housing finance system reform is needed in order for the enterprises to exit conservatorship,” but that clearly defined objectives can only come from Congress.

Why is this so important to credit unions? Because credit unions and banks are more dependent on selling their mortgages to the GSE’s than are the biggest players. The fear is that a truly free market for the sale and securitization for mortgages will leave them out in the cold paying higher mortgage costs.

Why hasn’t that clarity been provided? The second great failure when it comes to housing has been the Qualified Mortgage myth. The myth is that you can tighten lending standards without decreasing the number of people who own a home. The reality is, that for all of the justified outrage over banker recklessness, the mortgage crisis came about because too many people were given houses they couldn’t afford. The President could have started a national dialogue about homeownership and its limits. Instead, we have a political environment in which the cost of servicing mortgages has risen astronomically and politicians are still perpetuating the myth that if it wasn’t for the evil banks, everyone could afford the home of their dreams.

This is politically expedient but dangerously myopic. It’s as if we haven’t learned anything over the last eight years.

Entry filed under: Mortgage Lending. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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