Business
Obama to tout mortgage reform to help speed up recovery in housing market
Obama’s plan would phase out Fannie and Freddie, replacing them with a system that relies on the private sector to buy mortgages from lenders. Officials said the government would only step in to pay out mortgage guarantees after private capital has been exhausted and said private capital would bear the substantial majority of any losses.
Built into that system would be a guarantee that 30-year mortgages would still be available. Officials said that would involve some type of government guarantee for lenders, though they did not detail what that would entail.
Obama’s advisers did not outline a specific timeframe for winding down Fannie and Freddie. The Corker-Warner legislation would shutter the operations within five years.
Fannie and Freddie don’t make loans directly, but buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. The enterprises currently own or guarantee half of all U.S. mortgages and back nearly 90 percent of new ones.
Against the backdrop of Phoenix’s reinvigorated housing market, Obama will also tout refinancing proposals that gained little traction on Capitol Hill when he first unveiled them last year. Among his proposals is a call for expanding refinancing eligibility for homeowners who do not have government-backed mortgages.
Obama will also look to link his housing proposals to immigration reform, his top second-term legislative priority. Officials said he will argue that legal immigration can stimulate the housing market. According to the administration, immigrants accounted for 40 per cent of new homeowners nationwide between 2000 and 2010.
The nationwide housing recovery in the United States has been providing critical support to the economy at a time when manufacturing and business investment have stagnated. Steady job growth and low mortgage rates in the past year have also fueled more home sales. The increased demand, along with a tight supply of homes for sale, has pushed home prices higher. That’s encouraged builders to start more homes and create more construction jobs.
