- The Washington Times - Tuesday, June 3, 2014

Standard & Poor’s Corp., one of Wall Street’s top credit agencies, said Tuesday that the fragile housing recovery cannot continue without support from Fannie Mae and Freddie Mac, the two mortgage finance giants many in Congress seem bent on eliminating.

Fannie and Freddie are entrenched in the housing market and have become critical to the success of the faltering recovery which began in 2011 after a deep, five-year recession, S&P analysts said.

Fannie and Freddie provide guarantees to lenders on prime mortgages so they can be packaged and sold to investors. They have been the main source of financing for new prime mortgage since the housing crisis.

A shift toward stabilizing and supporting Fannie’s and Freddie’s role in the housing market announced last month by Federal Housing Finance Agency Director Mel Watt seemed to recognize the reality that there will be no replacement for Fannie and Freddie coming out of the gridlocked Congress anytime soon, S&P said.

“We believe this shift will contribute to further entrenching the role Fannie and Freddie play in U.S. housing finance and bolster their role in government policy,” said Standard & Poor’s credit analyst Matthew Albrecht.

“We expect the FHFA’s plan to maintain Fannie’s and Freddie’s role will support the housing market recovery. … Their ability to maintain business as usual as a key cog in U.S. housing finance will be paramount to the market’s stability unless and until broader reforms finally happen.” he said.

S&P’s statement emphasized Wall Street still views housing finance giants as fully backed by the federal government. The implicit federal guarantee on Fannie and Freddie resulted in a $180 billion bailout of the mortgage giants during the housing crisis, but they have fully repaid those funds since then with profits from their lending operations.

In the latest attempt to eliminate Fannie and Freddie — an oft-stated vow of lawmakers since the housing crisis — the Senate Banking Committee last month reported a bipartisan bill to wind down their operations and replace them with a new federal guarantee agency.

But despite solid committee support for the bill, lawmakers conceded it was unlikely to pass the Senate this year as Senate Democrats increasingly object to replacing Fannie and Freddie with an untested new housing finance system at a time when the housing market’s recovery remains in doubt.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.


Click to Read More

Click to Hide