Treasury: Government presence in housing 'neither sustainable nor desirable'

-Housingwire

The housing market still remains a fragile element of the economy, Assistant Treasury Secretary Mary Miller said, outlining the government's myriad efforts to get the industry back on its feet.

Miller spoke at the Women in Housing Finance annual dinner Thursday night, highlighting the administration's programs to pull housing out of its multiyear malaise.

Included in the effort: A working group of members from the Federal Housing Finance Agency and the Federal Housing Administration to consider changes to pricing and other standards at Fannie Mae, Freddie Mac, and the FHA, with the objective of reducing their market share over time.

"Treasury has created new programs to better address current challenges, like the $7.6 billion Hardest Hit Fund, which allows state housing finance agencies in our nation’s hardest hit housing markets to design locally targeted foreclosure prevention programs," Miller said.

She oversees federal borrowing at the Treasury, which includes managing the U.S. national debt. Miller also advises Treasury Secretary Timothy Geithner on the effect of federal policy and regulation on financial markets, including the administration’s plan for housing finance reform.

More than 4.5 million mortgage modifications were started between April 2009 and April 2011, including more than 1.5 million trial modification starts through the administration’s Home Affordable Modification Program.

Still, home prices have dropped more than 30% from their 2006 peak, housing starts are one-third the rate prior to 2005 and 3.5 million existing homes are on the market with another 3.8 million units in the shadow inventory. Foreclosures remain high and one in four homeowners is underwater, owing more than their homes are worth.

More recently, Treasury issued a program directive for the largest mortgage servicers participating in the Making Home Affordable Program that requires them to assign homeowners applying for assistance a single point of contact to improve servicer accountability and efficiency. FHFA has helped, directing Fannie Mae and Freddie Mac to align servicing guidelines.

"But the current government presence in the market — with over 90% of new mortgages backed by the government — is neither sustainable nor desirable for the long term," Miller said. "We also recognize the necessary balance that exists between moving swiftly to reduce the government’s footprint in the market and ensuring that any actions do not disrupt the still fragile housing market."

Treasury is also taking steps to gradually wind down its agency-guaranteed mortgage-backed securities portfolio acquired during the financial crisis. The Treasury held nearly $200 billion MBS at one point, and began shedding these assets in March.

Miller suggested reform of Fannie and Freddie may not take as long as the five to 10 years that others have suggested, noting she hopes to get legislation passed within two years.

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U.S. Government Needs to Change Focus

-Bank Foreclosures Sale

People across the country continue to attribute the number of current foreclosures to the banks allowing individuals to purchase homes on sub-par income as was common before the heightened government regulations and mass number of foreclosures. Although this may have been part of the reason the foreclosure inventory drastically increased over the last few years, the current foreclosures are more than likely due to high unemployment.

Our nation’s government continues to focus on creating programs to assist individuals unable to pay their delinquent mortgages in an effort to combat foreclosure. Although these initiatives are great and do provide relief for some individuals they are not sufficient to keep people in their homes. Why?

Most foreclosure relief programs only delay the foreclosure process as they provide up to three months of assistance. However, most people are unemployed for around nine months as opposed to three. In these situations, foreclosure is only prolonged as opposed to solved.

What does all of this mean? The government needs to keep the programs that are being offered to provide foreclosure relief; however, there has to be national attention, time, and effort devoted to decreasing the unemployment rate by increasing the number of jobs. The unemployment rate must decline before the foreclosure inventory subsides.

For those still facing foreclosure, there are various ways to help avoid foreclosure through everything from loan modification to short sales. The first step in avoiding foreclosure is working with your lender to amend your loan and possibly decrease your monthly payment to something more manageable. If you cannot reach a deal with your lending company, you may wish to consider a short sale or a deed-in-lieu of foreclosure. There are also several other methods that may help you avoid foreclosure.

On the other hand, for those that do have stable jobs, the current real estate market provides exceptional opportunities for investing in low priced homes with all-time low interest rates. The current inventory of foreclosures includes everything from duplexes to multi-family homes.

In conclusion, the United States government should maintain the current programs to provide foreclosure relief while also turning their attention to addressing the nation’s unemployment problems that in turn affect the real estate market.

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