Home > Financing and interest rates, Legislation, Uncategorized > Obama says it is time to wind down Fannie and Freddie

Obama says it is time to wind down Fannie and Freddie

September 16, 2013 Leave a comment Go to comments

Almost five years after taxpayers bailed out mortgage giants Fannie Mae and Freddie Mac, President Obama said on Tuesday that it’s time for private investors to take a bigger role in the mortgage market.

Fannie and Freddie collapsed in 2008 before being bailed out with almost $200 billion in taxpayer funds.

But with the nation’s real estate market on the mend, Obama said in an address in Phoenix on home ownership that it is time to wind down the two companies and make clear that the days of a guaranteed government bailout are over.

“For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” Obama said. “It was heads we win, tails you lose.  And it was wrong.”

For the better part of his time in the White House,  Obama has faced calls to shake up Fannie Mae and Freddie Mac, but the administration has held back on taking action while the housing market was weak.

With his remarks, Obama for the first time endorsed bipartisan efforts in the Senate at mortgage reform. At the same time, he made it clear that he expects any legislation will spell out a limited government role for backing Fannie Mae and Freddie Mac in the future, and that it must ensure Americans’ continued access to a 30-year mortgage at a fixed interest rate.

“I believe that while our housing system must have a limited government role, 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,” Obama said.

Obama also repeated his call for Congress to take action to make it easier for homeowners who are underwater on their mortgages to refinance their loans at lower interest rates.

The president also attempted to tie the fate of the housing market to Congress passing an overhaul of the country’s immigration laws, a second-term legislative priority for the White House that is facing tough opposition in the Republican-controlled House. He noted a recent study by the pro-immigration group Americas Society/ Council of the Americas that shows immigrants have added $ 3.7 trillion in housing wealth.

“It’s pretty simple: When more people buy homes, and play by the rules, home values go up for everybody,” Obama said.

Obama chose Phoenix – the epicenter of the U.S. housing bust that wiped out $7 trillion in homeowner equity – to make the next speech in his ongoing summer road tour in which he has been spotlighting his ideas for creating jobs and promoting growth, while hammering Republicans for not working with him to help bolster a still lackluster economy.

The speech on Tuesday is a bookend to the remarks he made in Phoenix shortly after taking office in 2009 as the real estate market crumbled.

While the Phoenix market is still well below its pre-housing crisis height, the area has made progress. The median single-family-home price rose again to $185,000, up about 26% from May of last year. And foreclosure starts hit historical levels this spring.

The president will follow up his speech on Wednesday with an online interview on the real estate website Zillow where he will expand on his ideas for keeping the housing market on a winning streak.

Before the speech, Obama was greeted at Phoenix International Airport by Arizona Gov. Jan Brewer.

The two had a famously tense exchange last year on the Phoenix tarmac, in which Obama expressed his displeasure with Brewer, a Republican, describing him as “patronizing” in her 2011 book Scorpions for Breakfast. At one point during the 2012 meeting, Brewer was seen by reporters wagging her finger at Obama and the two appeared to be talking over each other.

This time, however, the two appeared to have a friendly chat.

By Aamer Madhani, USA TODAY

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