Mixed Signals from HUD Housing Policy Conference
/// This can effect you greatly, in terms of refinancing or buying new home/ or if Feds decide to ‘nationalize’ your home loan. Ed.dr.e /// Unfortunately, some observers suspected that the conference — currently underway — might be biased against homeowners and advocates for affordable housing.
As a bit of background, remember that in addition to the ongoing foreclosure and real estate valuation crisis, homebuilder confidence is sinking and mortgage backed bonds are slumping. The latter means that there are fewer buyers for the mortgages written by your local banks and mortgage brokers and that in turn means there may be less money available for them to lend. But back to Washington D.C..
In one corner, Bill Gross, the man who runs one of the biggest bond funds out there — not just mortgage based bonds, but all kinds of bonds — says that the current housing finance system just can’t be maintained. The only hope, he says, is to nationalize the whole thing, making a single Fannie Mae/Freddie Mac hybrid the sole purchaser of mortgages and mortgage backed securities. He also pushed for automatic refinancing of all mortgages currently in Fannie and Freddie’s portfolios (presumably at today’s super low interest rates, with forgiveness of principal so those homes are no longer underwater, preventing thousands if not millions of foreclosures and short sales).
In the other corner, Treasury Secretary Tim Geithner says the government must reduce it’s role in Freddie, Fannie, and the whole mortgage system as soon as systems are in place to make sure another crisis doesn’t happen. Or, as CNN put it, “Geithner says stop crying over Fannie’s spilled milk.”
I’m no fan of Tim Geithner, but I suspect that the real solution going forward must lie somewhere between Mr. Gross’s “nationalize and refinance it all” idea and Mr. Geithner’s “shore it up and leave it alone” strategy.
Cross-posted at BridgetMagnus.com.