The National Association of REALTORS released today their recommended plan for restructuring Freddie and Fannie. The plan would continue to structure them as governement sponsored enterprises, but apparently without outside shareholders in an effort to prevent the past outcome of private profits while taxpayers were left to foot the bill for losses.
“As the leading advocate for home ownership, NAR believes that the federal government must continue to play a role in the mortgage markets to ensure the steady flow of safe and affordable mortgage funding that middle-class consumers need, and only the government can provide that backing,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I.
According to the NAR press release:
NAR believes the previous structure of Fannie Mae and Freddie Mac with private profits and taxpayer loss must never recur; however, without some level of government backing of the most basic, simple mortgages – such as the 30-year fixed rate product – interest rates and mortgage fees will be notably higher for consumers and could severely restrict access to credit, especially during down or disruptive markets. The recent economic downturn, for example, caused private capital to flee the marketplace; government backing of residential mortgages was critical in providing capital to borrowers and without their support the financial crisis could have been far worse.