Loan Modification

Loan Modifications; Obama Polls Americans on How to Overhaul Fannie and Freddie

By Andrew

Obama’s Making Home Affordable plan has relied heavily on Fannie and Freddie as key players in the government’s strategy to revive the housing market. Freddie and Fanny encouraged ? some might say bullied ? servicers and lenders on their servicer lists to accept loan modification programs. This was not cheap. Bailing out Freddie Mac and Fannie Mae cost American taxpayers more than $125 billion. This is by far the most expensive bailout of the long list of government bailouts since 2008.

Yesterday Treasury Department started the process of overhauling these two mortgage juggernauts. It seems like Treasury are not quite sure what to do with them. Either that or they are just a very polite government department because they are asking the American taxpayers 7 questions on what they should do with Fannie and Freddie. The US treasury press release explains this unorthodox move as a display of the government’s interest in “hearing from a wide variety of perspectives. [?] This open process will help shape the future of our housing finance system.”

Whether this open process will help or not is still to be seen. What is certain is that changes made to the quasi-governmental corporations will have a strong effect on the housing market. Treasury will gather the suggestions at www.regulations.gov. What do these questions deal with? These questions request suggestions on the value of home ownership (as opposed to renting), the role of government in guaranteeing money for loans, and allowing for variability of income, and housing requirements of different regions.

These are the questions in full:

• 1. How should federal housing finance objectives be prioritized in the context of the broader objectives of housing policy?
• 2.   What role should the federal government play in supporting a stable, well-functioning housing finance system and what risks, if any, should the federal government bear in meeting its housing finance objectives?
• 3.      Should the government approach differ across different segments of the market, and if so, how?
• 4.      How should the current organization of the housing finance system be improved?
• 5.      How should the housing finance system support sound market practices?
• 6.      What is the best way for the housing finance system to help ensure consumers are protected from unfair, abusive or deceptive practices?
• 7. Do housing finance systems in other countries offer insights that can help inform US reform choices?

It will be interesting what comes out of this poll system of creating federal legislation. It does seem that the government asking what to do with Fannie and Freddie after they bailed them out is a little like buying a million dollar home in the slums, and then asking your wife what she would like to do with it.

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Related posts:

1. Fannie & Freddie Should Be Fully Privatized
2. Push-Pull at Fannie Mae and Freddie Mac
3. Fannie and Freddie on Verge of Bailout

1. Fannie & Freddie Should Be Fully Privatized
2. Push-Pull at Fannie Mae and Freddie Mac
3. Fannie and Freddie on Verge of Bailout

Full post as published by Blown Mortgage on April 16, 2010 (boomark / email).