Treasury Secretary Timothy Geithner testified Tuesday on a plan to reform Fannie Mae and Freddie Mac, the government-sponsored enterprises now in limbo. But we don’t have to wait years to reform the mortgage system; a better approach could be introduced right away. The business model of Fannie Mae and Freddie Mac is fundamentally unsound. These public-private partnerships were supposed to serve the public interest and the interest of shareholders. But this was never properly defined and reconciled. Management’s interests were more closely allied with those of shareholders. They had an incentive to lobby Congress — both to expand homeownership and to protect and use their government-sponsored duopoly status. The GSEs extended their activities from insuring and securitizing mortgages to building highly leveraged portfolios of securities by taking advantage of their implicit government backstop. They profited from the growth without bearing the risk of collapse: Heads they win, tails you lose.
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Some housing pundits report the demand for housing is strong, while these same pundits, on another day say that we are in a housing affordability crisis. Can the two narratives be accurate at the same time? If not, which is one is true? HousingWire Columnist Logan Mohtashami takes a deeper dive.
Across the Twittersphere Tuesday morning, real estate agents and home sellers griped about the glitches they were experiencing on the Zillow website.