Hello, LOs!
All the changes at the federal regulatory agencies in the past week has me looking to the horizon. Maybe that's why a recent proposal for turning Fannie Mae and Freddie Mac into a government-owned corporation caught my eye.
After all, just a little over a week ago, Mark Calabria was still running the federal housing finance system. Now, the housing industry is practically leaping for joy to have a trusted and experienced official leading the regulator.
So, who's to say more big changes aren't coming? Just today, FHFA Acting Director Sandra Thompson issued a bold statement on fair lending, proclaiming, "Illegal discrimination has not and will not be tolerated by FHFA."
Biden has shown absolutely no appetite for releasing the GSEs from their conservatorship. Could he instead push for further government control over the housing market, to accomplish his goal of closing the racial homeownership gap?
Here's how an existing proposal would work. Dan Immergluck, a professor at Georgia State University, in 2011 proposed a government-owned corporate structure for Fannie Mae and Freddie Mac. Doing so would eliminate the need to incentivize the private market to do things that might not be profit-maximizing.
It could also allow the government to eliminate "risk-based pricing," by cross-subsidizing loans to those with lower credit scores and smaller down payments with the profits from loans to wealthier borrowers.
"Given the entrenched legacies of racial discrimination in housing markets and housing finance,
the new entity should also be charged with reducing racial and ethnic disparities in access to mortgage credit, loan pricing, and homeownership rates," Immergluck writes.
Those persistent disparities were on full display last year, when borrowers who refinanced cashed in on a total annual savings of $5.3 billion, according to the Federal Reserve Banks of Boston, Atlanta, and Philadelphia. Black homeowners were half as likely to refinance, and reaped just $198 million in savings, in part because loans in forbearance don't qualify for refinancing.
Running Fannie Mae and Freddie Mac like public utilities might help make homeownership more equitable. But I have a feeling the mortgage industry would have some thoughts on the matter.
Let me know if you think this is a harebrained scheme, or if it should be one more arrow in the government's quiver, along with a 40-year mortgage. Send a note to: gkromrei@housingwire.com.
Georgia Kromrei
Senior Mortgage Reporter, HousingWire
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