Sen. Tim Scott (R-SC), the ranking member of the Senate Banking Committee, led a coalition of the Committee’s Republican members and 23 members of the House Financial Services to express concern over the proposal to allow Freddie Mac (OTCBQ:FMCC) to purchase and guarantee single-family closed-end second mortgages.
In a letter to Federal Housing Finance Agency (FHFA) Director Sandra Thompson, the lawmakers complained the proposal deviates from Freddie Mac’s mission while increasing systemic risk and politicizing federal housing policy.
“We are deeply concerned that the proposal is a thinly veiled attempt by the Biden administration to offset the effects of excessive fiscal spending and tight monetary policy as the November election approaches,” the lawmakers said in a letter to Thompson. “The sole purpose of the FHFA’s conservatorship of the GSEs is to restore their soundness and solvency so they can fulfill their statutory missions—under no circumstances should the FHFA’s ultimate authority as a conservator be exploited for political purposes. The GSEs are already the largest mortgage guarantors in the country; expanding their roles as consumer loan guarantors is a significant step in the wrong direction.”
The lawmakers argued that second mortgages are consumer loans, and the proposal would turn Freddie Mac “into a massive consumer loan guarantor that disrupts credit markets and crowds out private capital. A GSE-insured product that uses subsidized lending to offer reduced interest rates, extended loan terms, and lower monthly payments will have unfair advantages over private lenders and ultimately reduce diversification in home equity lending, second liens, home improvement, installment, auto loan, and other consumer credit markets. Government subsidization will not only enable the proposed product to offer terms that are economically impossible for private capital to match, but represents a vast (albeit indirect) expansion by the GSEs into these other credit markets.”
The lawmakers added the proposal “will primarily help homeowners who possess meaningful equity in their homes and have already gained from the 68.9% increase in home prices since the pandemic. It offers no benefit to renters or homeowners who lack meaningful equity, such as first-time homebuyers. In fact, the proposal is likely to adversely affect these Americans through its broader inflationary impact on the economy, as well as by exacerbating the rate lock-in effect, the adverse effects of which were reported on by the FHFA earlier this year.”
The lawmakers also stressed the FHFA’s 30-day comment period on the proposal was “insufficient for market participants to provide feedback on a proposal with such an outsized impact on the housing market, to say nothing of its potential impact on the overall economy. Thus, the unsuitability of a 30-day comment period in this instance is further evidence that the proposal is outside of the GSEs’ mandate.”
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Just another tool the government is attempting to use to further the gap between the “haves” and the “have-nots”. Soon the average American will be unable to afford any type of ownership that would allow them to built equity or reduce monthly expenditures. Home ownership and even owning an automobile will become less and less attainable. We will become a nation of renters and leasers. This is already the trajectory in housing with large corporations being allowed to purchase vast numbers of residential properties, turn them into rentals, and further reduce the number of homes available for individuals to purchase during a time when we are already experiencing record low numbers of homes for sale. The American dream is rapidly turning into the American pipe dream.
The Biden Administration is using these 2nd loans to fend off foreclosure thru the financial banks by providing loan modifications at a record pace. Foreclosure rates are at a low currently, because of these loan mods that allow the banks to provide a second loan at a low interest rate and repayment in 40 years. The second usually covers what payment amounts of interest and fees associated with not maki g their payments.
Biden trying to make himself look better before the election. Get rid of this guy and get our country back on track.