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Key House Republican praises Obama housing plan
Question of the Day
And Rep. David Scott, Georgia Democrat, suggested the administration’s plan might risk a situation where the private lending market does not provide enough money for the demand for mortgages.
In an apparent warning to some Republicans who want to quickly pull the government out of its role in supporting the mortgage system, Mr. Geithner also warned in his prepared statement that acting too fast would hurt as well.
“While we are confident that the steps we have laid out follow the right path, haste would be counterproductive — possibly destabilizing the housing finance market or even disrupting the broader recovery,” Mr. Geithner said.
Congress is trying to decide how to reshape the federal role in the housing market, which remains weak, with low prices and huge numbers of foreclosures in Florida, parts of the Southwest and other regions. While both political parties concede that changes are needed to protect taxpayers and revive private lending, Republicans tend to want to move more strongly while Democrats express more concerns about maintaining the government’s role in helping lower-income families.
To wind down Fannie’s and Freddie’s roles in the market, the administration also wants to take steps for which it does not need congressional action, such as decreasing the size of loans the two companies may buy. Mr. Geithner also reiterated administration plans to constrict the Federal Housing Administration’s role in making loans. Some Democrats and consumer advocacy groups have complained that such actions will make it harder for many families to purchase homes.
The administration’s report offered three options for overhauling Fannie and Freddie. One would limit the government to helping poor and middle-class borrowers through agencies like the FHA. The second would have the government back private mortgages, but mostly during times of economic crisis. The third would have the government “reinsure” some mortgage investments that are already guaranteed by private insurers.
The two companies buy mortgages from banks and other primary lenders, package them together and sell them with a guarantee that investors would be repaid in case of default. That system helps keep interest rates lower and provides lenders with fresh cash to make additional loans.
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