Super Tuesday Here; Housing Solutions Still Elusive

This morning’s guest post is from Brian Noyes of Brock Clay Government Affairs.  Brian and I have been discussing potential solutions to the housing market for quite a while.  After I wrote this piece, he responded by creating a facebook group Restoring The American Dream to raise awareness of the multiple levels of government roles in the current housing and mortgage markets, and advocate for market based solutions. I’ve written about this topic quite a bit, and decided it’s time to present other ideas from other voices.

Super Tuesday is finally here.  In Georgia, for weeks candidates have come to our state and rallied supporters with applause lines like ”jobs are priority #1” and ”we need to get the economy moving again”.  Yet, unfortunately, none of the campaigns have really addressed one of our country’s biggest economic problems – housing.

Between Dec 2007 and Dec 2010, over 1.9 million jobs were lost in the construction sector alone.  Declining home values, stifling regulations on lending institutions and uncertainty in the market have held back a major segment of our economy.  Georgia ranks at the top of the list in foreclosure rates and bank closings.   2011 was the fourth year in this prolonged economic downturn and metro Atlanta home values plummeted yet another -12.8 %.

Instead of accepting the trajectory that is leading us toward more taxpayer liability and fewer commercial options, Congress has the authority to act; and not just as a checkbook for Wall Street.  The US government has already pumped over $ 150 Billion into Fannie and Freddie since taking it into receivership in 2008.  Meanwhile, the executives at these two Government Sponsored Entities (GSE)s received over $ 12 Million in bonuses this past year, then reported $ 4.6 Billion in losses  and came to taxpayers for more bailout funds.

There are solutions for federal housing policy that promote market based solutions to home buying, building and financing.

Congress can transition the GSEs to more private capital and move away from the dependency on public securitization for the secondary markets.  Federal programs insure almost half of all mortgages in the US for a total of about $ 5 Trillion, and the problem gets bigger daily with 80% of all new mortgages going into these bundles.

Washington needs to get out of the way and restore the flow of credit to the housing industry by decreasing regulations on banks and lending practices.  Entrepreneurs, such as home builders and community banks, will build, invest and create jobs and growth if we take away some of the ridiculous restrictions from Dodd-Frank and other similar financial legislation.

Fannie and Freddie are the largest owners of foreclosed properties in Georgia.  There is a current program being tested to allow more rapid resale of these REO properties and Atlatna is one of the test markets.   With any success, they will move from vacant buildings being maintained at taxpayer costs, to viable homes again.  Hopefully this will be the first step to relaxing investor restrictions and allowing private owners to take these properties off the hands of the federal government and stabilize communities.

Mr. DeMarco and his team at FHFA can also help promote the use of creative means in the refinancing of underwater mortgages in these networks.  This can be accomplished without a directed “write-down” and shifting the financial obligations to taxpayers – again – as is being advocated by the Obama Administration.

Fixing the national debt, Social Security, Medicare, Medicaid and energy policy are all critical to our domestic economy; and fortunately, most federal officials and candidates have their talking points ready-to-go for these items.   They need to add one more point.  Inaction on these federal housing programs will plunge us further into government dependency and further away from the private, market based solutions that have made owning a home part of the American Dream.


  1. saltycracker says:


    Couldn’t agree more. Unfortunately the national culture today is asking the Government what they can do to take full responsibility aka ownership, to solve this issue.

    Neither the GSE’s or the private lenders want to trade off their above avg. interest paying responsible debtors when the taxpayers can bail them out of enough bad ones.

    Redundant but set GSE refi’s for the responsible at 4%. Repeal Dodd-Frank and begin raising the Fed loan rate to banks forcing them to deal with non-performing assets. When the government is not anticipated to enable its people, the market is a lot more capable of working this out that we give it credit for.

    Contrary to some of the posts on PP, cultural bankruptcy does lead to financial bankruptcy.

  2. OleDirtyBarrister says:

    One thing that can be done short of repealing Dodd-Frank is to expressly limit its applicability to private sector, non-bank, non-mortgage entities that engage in seller financing. There is presently concern and uncertainty among entities that sell and finance a number of homes for consumers whether D-F applies. Clarifying the limit would allow people to buy stub farms and build them out as well as buy existing inventory at depressed pries and turn around and sell them with financing in place. That means people on the lower end that cannot get a mortgage can buy a home and the taxpayer does not have to be involved or indemnify anyone.

    Multi-family housing development is coming back because the financing is not there for a lot of people. A substantial number of them may have had mortgages before the collapse, and the taxpayer does not need to get dragged back in to indemnify them again. Let the private sector handle it, even if the rates paid are market and not the special, ultra low gubmint rates.

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