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Mortgage industry needs reform

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CONNER LONG
June 10, 2011
EDITOR’S NOTE: This is among commentaries written by students in the Washington Seminar program at Janesville Parker High School. The seminar is for students in the advanced placement U.S. government course taught by Joe Van Rooy.

As our government debates how to reform government-sponsored entities Fannie Mae and Freddie Mac, some legislators and experts say we need to terminate the two companies altogether. I believe it would be improbable to terminate Fannie Mae and Freddie Mac completely; however, large-scale reform is needed to correct problems not only in Fannie and Freddie but the whole housing system.


We need to better regulate the mortgage lending industry, better educate consumers and stick to standardized loans.


I think that regardless of which way the market goes, the government will have to be involved because private industry would never be able to survive a crisis such as the one we have experienced. The problem of going with a privatized market is that interest rates on loans would be much higher, making homeownership more challenging.


Judith Dunn and Margaret Chase of Fannie Mae said Fannie and Freddie account for almost $3 trillion in the global economy.


Fannie Mae and Freddie Mac hold a lot of money in foreign investments through their securities, and this would be hard for the private market to replace because U.S. government-backed securities are more sought after by foreign investors.


When I spoke with Ginnie Mae President Ted Tozer, he told me, “Government-backed securities such as those sold by Ginnie Mae are sought after because they have the U.S. government-backed guarantee.”


The most common view among all legislators and experts that I found is what John Courson, president of the Mortgage Bankers Association, said: “We need to boost consumer confidence and reduce the number of foreclosed homes on the market.”


To restore our housing system and be successful, we need to better regulate, educate consumers and bring confidence back into government-backed lenders.



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