PARAMOUNT MORTGAGE - LENDER'S BLOG

The House Financial Services Subcommittee on Wednesday held the first in a series of hearings about the future of Fannie Mae and Freddie Mac. These two mortgage market giants together with the FHA guarantee 90% of U.S. home loans.

Testifying before the committee, Sarah Rosen Wartell, Executive Vice President for the Center for American Progress Action Fund stated, "we must have a long-term plan in mind for what replaces the GSEs." In light of the past financial crises Wartell wants "private capital to bear as much of the load as possible in our housing finance system going forward."

The National Association of Realtors (NAR) counters, "the U.S. housing market needs affordable mortgages and the best way to make sure of that is to make sure Fannie Mae and Freddie Mac continue to exist," states President Ron Phipps.

Without government-supported mortgage programs from Fannie Mae, Freddie Mac, FHA, and VA, interest rates on home mortgages would rise by 2 percentage points, says Phipps.

NAR wants to see Fannie Mae and Freddie Mac restructured as government-chartered, non-shareholder-owned authorities.

"The federal government must continue to play a role in the mortgage markets to ensure the steady flow of safe and affordable mortgage funding that middle-class consumers need, and only the government can provide that backing," Phipps says.

NAR believes the previous structure of Fannie Mae and Freddie Mac with private profits and taxpayer loss must never recur. Without some level of government backing however, the most basic, simple mortgages (like the 30-year fixed-rate loan) will cost consumers more in higher interest rates and mortgage fees.

Government backing of residential mortgages was critical in providing capital to borrowers and without their support the financial crisis could have been far worse, Phipps says.

The restructured GSEs under NAR's plan would guarantee or ensure a wide range of safe, reliable mortgage products such as 15- and 30-year fixed-rate loans. And those loans would be available even in areas where home prices are relatively high.

"It's essential that borrowers continue to have access to safe and affordable mortgage credit," Phipps says. "This includes making permanent the higher loan limits passed last year and set to expire on Sept. 30, 2011. Increasing access to credit will better meet the needs of home owners in all parts of the country and lead to a faster recovery in the housing market and faster job creation. Housing recovery and job creation go hand in hand."