Also in this playlist...
This transcript is automatically generated
Congress may finally be ready to tackle an issue that Washington has really largely ignored for the last by the -- What the heck are they gonna do with Fannie and Freddie.
Well our next guest says the proposal set up the mortgage giants to fail again.
Joining us now former Fannie Mae chief credit officer Ed Pinto and now at AEI Ed I'm glad to hear so we -- this proposal on the floor.
-- Kurt Warner draft bill on the floor right now and you're basically saying it's kind of like deja Vu all over again.
It is Tracy.
It suffers from the same fatal flaw that many the other proposal that the government mortgage complex that continues to push.
A government guarantee is this central feature of the proposal.
And that guarantee.
Ends up with three problems first.
It the government can't.
-- price for risk is -- incapable and in many cases unwilling to do that we've seen that time and time again.
The fact that there's this -- pricing creates distortions.
An asset allocations.
Which -- the seeds of its own future problems and then third.
Congress eventually wakes up Sunday and says wait a minute we're giving something away for nothing and we need to get some benefit here and so they politicize.
The lending process.
They've got it backwards -- what you need is housing finance market that's based on sound underwriting.
That's what -- provide stability and that's abilities really gotten from having.
The preponderance the loans being high quality prime loans.
And I did you completely but and that that I guess that age old problem is how do you unwind this thing.
How do you take away these -- me can't take away these loans from the civil rights you just due to stop doing number.
I think quick to do is you wind down Fannie and Freddie by a continuing to raise there guaranty fees.
By forcing them to bring in private capital.
In front of them by lowering their mortgage limits.
You also have to limit FHA is otherwise the business we'll just shift over there I and then as that happens the private sector.
Steps -- And if you have a market based on loans that.
In in I -- it was very low default rates historically we had very low default rates we threw it all the way.
In the 1990s in the -- years in the name of affordable housing and putting people -- homes they just couldn't afford.
It makes so much sense for the problem is it also takes so much time.
And by the time we get to a point where it could potentially be feasible what -- you know it's an election year.
And nobody wants to rock the -- and so to your point that they politicize it.
They kind of -- it didn't fit politics well all of round -- -- absolutely I was at an event yesterday that the so called bipartisan.
Policy -- put on.
And they had all of the usual of people they're talking.
About how he needed government guaranteed now you had to provide access for -- many people as possible.
Affordability will these turns.
We've been through this process this is exactly what they tried in 1990.
Two and it was a tremendous failure.
And the result is as they -- you put people in the homes they can't afford.
You have to have.
Underwriting that people can actually afford the loan when they get it.
And afford the usual things that happen down the road.
They they have some.
Problem health problem or other problem.
That may happen they're not living so close to the edge right that they go into default that government doesn't isn't capable.
Of running housing finance market under those terms you have to get the government out right.
Do you have skin in the game and and and -- -- you -- has -- time and time again about this.
Has any I mean are you starting to at least feel like the tables are turning a little bit towards your side or is it still completely.
-- wants a deal of it let's just move on to something else.
I think it's going to be up to the house representatives to really craft.
A bill that follows.
As many of these principles.
Ironically the safety and soundness regulators the FDIC.
And the Fed and others two years ago put together a definition of -- of a qualified.
And they had many of these concepts.
The govern more complex -- been furiously pushing back on the that -- rule ever since.
Yet and that's a problem -- anti hope they're listening to use our down there thank you very much.
Thanks straight series a pleasure yeah.
Filter by section