Republican Lawmakers’ Attempt To Scale Back Mortgage Guarantees Likely To Damage Party Alliance With Housing Industry
As newly-elected Republican congressmen and women attempt to hold true to the values that got them elected by initiating cuts in government backing for home mortgages, leaders in the housing industry are making it known that they are less than pleased with their long-time allies[1]. Banking executives and mortgage investors are holding meetings with both republican lawmakers and their staff members to try and elicit a commitment that they will make the government’s role in guaranteeing mortgages a permanent one. However, thus far, many republicans are holding firm. Representative Spencer Bachus, chairman of the House Financial Services Committee and a republican from Alabama, says he’s not surprised that “the industry” is showing up in force: “I would love to make loans and if they failed, let the taxpayers make up the loss. That’s a pretty sweet deal,” he said.
Many members of Congress blame government-controlled Freddie Mac and Fannie Mae for the housing crash, however. As a result, some want the GSEs eliminated and others believe that the entire system will have to be revamped to prevent taxpayers from shouldering further losses. If mortgages are no longer guaranteed, it is likely that interest rates will rise and many will investors will no longer be interested in those investments, say experts. Ultimately, the mortgage market could be “smaller, less liquid and more expensive,” explained Annaly Capital Management director Jeremy Diamond.
Many political analysts believe that this is the issue that will ultimately divide the Republican party and the Tea party representatives. Do you believe that the government should continue to back mortgages in some capacity, or has that time come to an end?
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[1] http://online.wsj.com/article/SB10001424052748704279704576102310308442634.html?mod=googlenews_wsj
While I think the government’s loan guarantees have helped to fuel a booming real estate market and thus a booming economy in the past, I also believe that guaranteeing loans for people who could not possibly afford the houses when their creative (adjustable rate, interest only, and negative amortization) loans were brought back to reality was the major cause for the current economic crisis. Furthermore, I see no constitutional authority for the government to be involved in guaranteeing loans. Therefore, I think the programs should be phased out, but we are now in the middle of an economic crisis which cannot easily be resolved without getting the housing market healthy again so I think eliminating the guarantees should be a goal for the future rather than something to be done right away. There are plenty of other, more important things to work on now like repealing Obamacare and reining in the shadow government of the czars and agencies such as the EPA. These things are needed so that America can again compete with the rest of the world and bring our jobs back home. Housing loan guarantees can be addressed when the patient is healthy enough to survive without them.
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