The recent takeover of Fannie Mae and Freddie Mac by the U.S. Department of Treasury will bring a sense of calm to the market and in the short-term, the move will improve sales as mortgage rates fall, according to Realtors. But Realtors are also concerned in preserving the role of the two government-sponsored enterprises (GSEs), which provide capital to the mortgage markets and promote homeownership and housing affordability.
Under the takeover, the government replaced the companies' chief executives and shifted management control to their regulator, the Federal Housing Finance Agency. The federal government is authorized to take up to an 80 percent stake in the companies, and, as part of its duties under the conservatorship, will review both Fannie's and Freddie's financial condition quarterly, as well as inject money into the operations as needed.
National Association of REALTORS® officials stated the federal government had no choice. The capital situation of the two companies was not enough to handle the fallout from rising mortgage defaults in the near future. In addition, investors who purchase Fannie Mae and Freddie Mac debt had been losing confidence in the two companies.
"The plan will help restore confidence in the secondary mortgage market," said NAR President Richard F. Gaylord. "We appreciate the steps taken to make mortgages more widely available and protect taxpayers. We look forward to working with the administration and Congress to ensure the continued vibrancy of the secondary mortgage market."
Leannah Hunt, president of the Silicon Valley Association of REALTORS®, the local trade organization representing over 4,500 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay, described the federal government's takeover of the two giant financial companies as a "healthy move by the government to stabilize the mortgaged-back securities and financial markets."
Hunt noted, the takeover alone won't solve the real estate market's problems, but it's a start. "Many people in California have been affected by foreclosures and the subprime problem and, for the federal government to recognize it needed to assert itself shows it's moving in the right direction," Hunt said.
A REALTOR® with Coldwell Banker in Palo Alto, Hunt said Realtors want the government to fulfill their traditional roles in providing affordable mortgages to homebuyers.
The California Association of REALTORS® also reaffirmed its support for Fannie Mae and Freddie Mac and their countercyclical roles and emphasized in the longer term, these entities need to be able to fulfill their historic mission.
C.A.R. officials have expressed concern that the Treasury, and Fannie Mae's and Freddie Mac's new CEOs, will overreact and change the mission and role of the GSEs.
"A privatized Fannie and Freddie will short-circuit the countercyclical role the GSEs have played during precarious times in real estate markets," C.A.R. Executive Vice President Joel Singer warned.
"Without an institutionalized mortgage-backed securities market, mortgage capital will be less predictable and more expensive, and adjustable-rate mortgages could become the standard loan for home buyers, as could higher down payment requirements," Singer said. "The 30-year, fixed-rate mortgage as we know it will no longer be readily available for most home buyers and may effectively disappear. The result could be a dramatic decline in homeownership rates in California and across the nation."
"The most significant, reliable sources of home loans in California today are financed by either Fannie Mae or Freddie Mac. California's and the nation's housing markets simply cannot withstand the financial rug being pulled out from beneath them," Singer said. "Additionally, the repercussions this could have on the already weak economy could be devastating."
SILVAR's Hunt said, "As the leading advocates for homeownership and housing issues, we believe the mission of these two government-sponsored enterprises is crucial to the economy to make fair and affordable mortgages available to home owners and home buyers. That mission must not be interrupted."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.