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Major Changes Are Coming To Fannie Mae, Freddie Mac, Et Al

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Bert Craytor

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Certified General Appraiser
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Change is coming to the housing finance industry. I’m predicting that for appraisers to do well in the future, they need to become much better at their job: More accurate appraisals, more substance. Yet, this comes at a price. The only way out is to tie appraisals to property, make them transferable, so that respectable fees can be charged. Ben Carson is doing surgery and now Calabria, - and don't forget Trump.

--- Now is the time to exert influence on lawmakers.

Hybrids and AVMs will continue to add more flexibility to appraisal, and they cannot be stopped. They do have a place, e.g. for low LTV loans. But there will continue to be a need, in fact more of a need, for appraisals that provide a much better picture of current market value ranges, home design, condition, quality and aesthetics, predicted value ranges over time and so on.

From WSJ:

(NOTE: “The Wall Street Journal” is biased “Right-Center” https://mediabiasfactcheck.com/the-hill/ )

“WASHINGTON—A panel of Senate lawmakers on Tuesday voted along party lines to advance the nomination of Mark Calabria, President Trump’s pick to help overhaul the way many Americans finance their home purchases, setting up his likely confirmation later this spring.

The Senate Banking Committee voted 13-12 to approve Mr. Calabria’s nomination to become director of the Federal Housing Finance Agency, which regulates the mortgage-finance giants Fannie Mae and Freddie Mac .

A libertarian economist and senior aide to Vice President Mike Pence, Mr. Calabria told lawmakers earlier this month that he would work to preserve the popular 30-year, fixed-rate mortgage—a product he has criticized in the past—that currently accounts for approximately 90% of new home loans.

If confirmed, Mr. Calabria would play a key role in shaping the Trump administration’s efforts to end the decadelong conservatorship of Fannie and Freddie, taken over at the height of the financial crisis in 2008.
Ending government control of Fannie and Freddie, which back roughly half of the $10 trillion mortgage market, is Washington’s last major to-do item in the wake of the crisis.

Mr. Calabria would replace Mel Watt, an Obama-appointee and former House Democrat whose FHFA tenure ended last month.

Also on Tuesday, the Senate panel approved nine other Trump nominations for vacancies at the Treasury Department, the Department of Housing and Urban Development, the National Credit Union Administration and the Export-Import Bank.

https://www.wsj.com/articles/trump-pick-to-oversee-fannie-mae-and-freddie-mac-advances-in-senate-11551193655?mod=searchresults&page=1&pos=3

https://www.wsj.com/articles/wall-street-votes-to-support-single-security-for-fannie-freddie-11551995595?mod=article_inline

https://www.wsj.com/articles/private-investors-encroach-on-fannie-and-freddies-domain-11552132801?mod=searchresults&page=1&pos=1

On the moderate left we here this:

(NOTE: “The Hill” is biased “Left-Center” https://mediabiasfactcheck.com/the-hill/ )

“Calabria’s writings could reasonably lead you to believe that he will be of the former sort, seeking to release Fannie and Freddie from conservatorship in some manner and return them to private ownership. I do not see him doing this, because that plan would have to keep a government backstop in place for their obligations in one way or another. I certainly don’t see Calabria returning to the “good ole days” of privatizing profits and socializing losses that characterized Fannie and Freddie’s existence before they entered conservatorship.

I believe that he will be more of pragmatist, notwithstanding the content of some of his think tank writings. Calabria has written quite a bit, so we have a good sense of his views on a broad range of housing finance issues.

At various times, he has argued that:

1. The footprint of Fannie and Freddie in the mortgage market should be shrunk.
2. The credit risk exposure of private entities like private mortgage insurers should increase while the risk exposure to the federal government, as a guarantor of Fannie and Freddie, should decrease.
3. The 30-year mortgage should not be subsidized.
4. Fannie and Freddie-eligible borrowers should meet meaningful minimum down payment and credit score benchmarks.
5. Fannie and Freddie’s affordable housing goals should be ended.

There is a pretty clear theme: Calabria believes that there should be a significant reduction in the government’s role in the mortgage market.

First, he wants to transfer risk from the government and ultimately taxpayers, to the private sector. This is a relatively technical subject, but it fits well within a theme of “no more taxpayer bailouts” if voters were to focus on it. Second, he wants to reduce the implicit subsidies that middle and upper-income homeowners receive in the current system, because of their access to Fannie and Freddie-insured mortgages. Third, he wants to reduce the subsidies that low and moderate-income homeowners receive in the current system through policies such as the “duty to serve” low and moderate-income households in the mortgage market. These types of policies also have support that crosses party lines. Moreover, these policies are driven to some extent by adopted FHFA rules that would limit Calabria’s ability to make rapid and dramatic changes to Fannie and Freddie’s actions in this area.

The Trump administration is clearly working to put fair housing, fair lending, community reinvestment and consumer protection in deep freeze for the foreseeable future. So, from the perspective of an affordable housing advocate, there is a lot to oppose in the Trump agenda. But a move to redistribute credit risk in the mortgage market from the government to the private sector is not one of them, so long as housing proponents are able to protect programs that promote affordable housing and sustainable home ownership.”

https://thehill.com/opinion/civil-rights/429963-the-next-two-years-of-federal-housing-policy-could-be-positive-under

https://thehill.com/opinion/civil-rights/429963-the-next-two-years-of-federal-housing-policy-could-be-positive-under

https://www.housingwire.com/articles/48281-senate-banking-committee-approves-calabria-as-head-of-fhfa

https://www.housingwire.com/articles/47672-what-would-mark-calabria-as-fhfa-director-mean-for-the-future-of-fannie-and-freddie

https://thehill.com/opinion/civil-rights/429963-the-next-two-years-of-federal-housing-policy-could-be-positive-under
 
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