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Time to Change How Fannie, Freddie Operate?

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    BlackRock Vice Chairman Barbara Novick on the government’s role in the housing market.

  • Duration 3:29
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Well this year shaping up to be a great year for housing core logic forecasting prices to -- point 6% this year following a seven and a half percent last year.

And total home sales for the year marking their first increase since 2005.

Joining me now Barbara know that the vice chairman of BlackRock with a new report on housing.

You know I ask you -- -- say this a year of housing and what you really mean is it's the year we can start changing the way housing is regulated what do you mean.

It's more about housing finance so Fannie Mae Freddie Mac went -- to conserve readership.

Already more than four years ago September 2008.

Not much has happened since then.

-- it's time for congress to really look at this this is the year we have the stars -- moon lineup it's the first year of a secular administration right.

Obama had his second administration -- -- run run congress doesn't -- -- running for reelection to use say this is politically it's it's a great time.

What do you believe should happen should we get Fannie Mae and Freddie Mac out of the business of supporting the housing.

This is a multi trillion dollar market.

To say get -- Freddie out of the business is an extreme concept.

We think -- to change the way they operate obviously the the public company with.

Government support is not a good idea taxpayers have too much at risk.

But you can wind down the portfolio as you can keep them in what we call utility kind of role providing guarantee.

On this week or last week.

The consumer financial protection board.

Put out rules on.

We recorded -- that it extensively typically interrupted as I wanted to ask about something you just sad you say he can't take out Fannie Mae and Freddie Mac but unfortunately.

It seems to me that if you don't you run the same risks that you had back in 2008.

That ultimately the government is going to be supporting mortgages that make absolutely no.

Sense for many years Fannie Mae and Freddie Mac with a gold standard high underwriting standards similar to -- CSFB put out last week.

Very high quality loans reasonable balance loans.

Really sort of think it as a core that the government can support and help.

So that we have -- strong housing market and that things that don't fit back core.

That's what the private sector can do on its own but to think that the private sector can support.

The wealth -- you know that market sectors saying we're not gonna support any of the exotic loans are gonna walk away and we've seen banks.

Really deep six -- and mortgage operations getting out of the business entirely.

While small banks they're losing ground in going out of business because of Dodd-Frank who's gonna do the mortgage business -- you think.

-- -- -- Investors are often pension plans mutual funds insurance companies.

He's got servicers you've got originators get a lot of different participants we're talking about the need for bringing capital into that market.

From pension plans from insurance companies.

From investor -- around -- world -- this problem and that's where you really need the government guarantee.

A lot of investment guidelines can't buy private label they really.

Need that government guarantee.

So that's why we're a supporter of a limited role not not the role they have before but a much more limited role.

We'll see how works out maybe you're right maybe maybe the president's hands -- unfettered now on congress can do this -- Barbara thanks coming on I appreciate your time nice to see.

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