President Barack Obama laid out his initiative to reform the secondary mortgage market in a speech on Aug. 6 that trash talked Fannie Mae and Freddie Mac and voiced support for a senate bill that would wind down the government sponsored enterprises and replace them with a mostly privatized system.
“For too long, (Fannie Mae and Freddie Mac) were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag. It was ‘heads we win, tails you lose.’ And it was wrong,” Obama told his audience at a Phoenix construction company.
Instead, he proposed four core principles for how he would reform the housing finance system, and said he supports the bipartisan group of senators working to end Fannie and Freddie, referring to Republican Sen. Bob Corker of Tennessee and Democrat Sen. Mark Warner of Virginia, who introduced a GSE reform bill in June.
Following the speech, Corker said he sees growing momentum to finally move a structural housing finance bill that ends the Fannie and Freddie model, and added that he looks forward to working with his colleagues in congress and at the White House to see it through.
Obama said his first objective is to limit the government’s role and allow private capital to take a bigger role in the market. He made a passing reference to credit unions when he said that “private lending should be the backbone of the housing market, including community-based lenders who view their borrowers not as a number, but as a neighbor.”
The comment did not go unnoticed by industry trade associations.
“We appreciate the president’s leadership on seeking solutions to reform our housing finance system and his recognition of the importance of community-based lenders such as credit unions,” said NAFCU President/CEO Dan Berger. CUNA President/CEO Bill Cheney also made note of the nod, saying his organization was gratified to see that Obama recommended that credit unions and other small institutions have the same opportunity to compete in any future secondary mortgage market.
The era of bailouts for GSEs is over, Obama said while making his second point. And in his third point, Obama pledged to preserve access to the 30-year fixed mortgage.
Finally, the President said he would strengthen the Federal Housing Administration to help Americans achieve homeownership, and added his support for affordable rental housing.