The U.S. Treasury Department will hold a “Conference on the Future of Housing Finance” on Aug. 17, where “leading academic experts, consumer and community organizations, industry groups, market participants, and other stakeholders” will discuss the right approaches to housing reform. The event was announced on the White House blog.
The announcement follows an initiative in April by the Treasury Department and the Department of Housing and Urban Development. The agencies invited the public to comment on how to reform the “broken” housing finance system.
When Fannie Mae and Freddie Mac were on the brink of collapse in 2008, taxpayer money was injected into the two government-sponsored enterprises to prevent them from crashing. The Obama administration stated that “fundamental reform” is still needed to stabilize the market.
“The losses that the federal government has had to backstop are virtually all attributable to bad loans that Fannie and Freddie took on between 2005 and 2007—during the height of the housing bubble. … For decades, Fannie Mae and Freddie Mac privatized their profits while ultimately putting taxpayers at risk for losses. This type of ‘heads private shareholders win, tails taxpayers lose’ system of misaligned incentives makes no sense for the nation,” wrote Jeffrey A. Goldstein in a White House blog entry. Goldstein is the undersecretary for Domestic Finance in the Treasury Department.
The stakes are high in housing reform. Goldstein said Fannie, Freddie, and other government entities handle over 90 percent of newly originated mortgages. Currently, Fannie and Freddie guarantee more than $5 trillion in mortgages, and $1.6 trillion in agency loans, and other securities.
President Obama plans to submit a housing reform proposal to Congress by January 2011.