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NAHB to Look at Restoring Home Finance System Health
The nation’s home builders have expressed hope that the government’s action to place Fannie Mae and Freddie Mac into conservatorship will help to increase liquidity for home financing and restore confidence in the global financial markets.
In a statement issued shortly after the Treasury Department announced on Sunday, Sept. 7 that it was taking over the two mortgage industry giants, NAHB Executive Vice President and CEO Jerry Howard said: “At this critical turning point, it is essential that government regulators and all parties involved in the nation’s housing finance system work together to rebuild the nation’s secondary mortgage market — a move that is absolutely vital to provide affordable mortgages for America’s home buyers and to help spur an economic recovery.
“In that regard, NAHB looks forward to working with the current policy makers and stakeholders, as well as the next Administration and Congress on their ongoing efforts to restore the financial health of Fannie Mae and Freddie Mac.”
NAHB has established a high-level task force that will meet next week to discuss the long-term implications of the federal government’s decision to take over the two housing government-sponsored enterprises (GSEs). Moving forward, the task force will develop a series of policy recommendations on how to restore the health of the nation’s housing finance system.
Treasury Secretary Henry Paulson and Federal Housing Finance Agency (FHFA) Director James Lockhart announced on Sept. 7 that FHFA was placing Fannie Mae and Freddie Mac into conservatorship and that the Treasury Department would provide financial support to the companies under authority established in the GSE portion of the Housing and Economic Recovery Act of 2008.
Lockhart stated that the move was required because Fannie and Freddie had become unable to balance the pursuit of their housing mission with safe and sound operations. Paulson cited the risk to the financial system of Fannie’s and Freddie’s large portfolios and said that he would not have opened access to the government backstop without the safeguard of conservator oversight.
Both officials said the immediate objective is to stabilize the mortgage and financial markets, improve affordable housing opportunities and speed a housing recovery.
Conservatorship means that the companies will function temporarily under management appointed by FHFA to operate the firms on behalf of the agency. The idea is to shore up the firms during the conservatorship period so they can return to independent operations on sound footing. As Sec. Paulson stated on Sunday, Fannie Mae and Freddie Mac were open for business as usual on Monday.
The current CEOs, Fannie Mae’s Daniel Mudd and Freddie Mac’s Richard Syron, have been dismissed from their positions (along with the companies’ boards of directors) but will stay on as advisors during a transition period.
The conservator CEO for Fannie Mae is Herb Allison, who worked for decades at Merrill Lynch and most recently served as chairman and chief executive of TIAA-CREF. David Moffett, the new chief executive at Freddie Mac, is a former vice chair and chief financial officer of U.S. Bancorp.
For more information, e-mail David Ledford at NAHB, or call him at 800-368-5242 x8265.
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