NAHB Cautions Congress on Fannie, Freddie

Washington, DC, May 27, 2011 -- With some members of Congress actively pushing to abolish Fannie Mae and Freddie Mac and end the federal backstop for housing, the National Association of Home Builders told Congress Thursday that maintaining an appropriate level of government support is absolutely essential to preserve financial stability.
 
Testifying before the Senate Banking Committee, NAHB First Vice Chairman Barry Rutenberg said that absent a federal role to help reassure mortgage market investors, the cost and availability of mortgage credit would be subject to unpredictable volatility.
 
“The historical track record from the 1998 Russian crisis to the tragedy of Sept. 11 clearly shows that the private sector is not capable of providing a consistent and adequate supply of housing credit without a government backstop,” said Rutenberg.

“Therefore, as the private market transitions to assume a greater responsibility, there must be a predictable, permanent federal role in order to ensure a consistent supply of mortgage liquidity and to allow rapid and effective responses to market dislocations and crises.”
 
NAHB opposes legislation pending in the House and Senate that would effectively wind down the operations of Fannie Mae and Freddie Mac without offering a clear vision for the future housing system and a non-disruptive transition to a new secondary market framework.

Without a federal backstop for housing, Rutenberg warned that the 30-year, fixed-rate mortgage, the major housing finance tool for most Americans, would become increasingly scarce and much more costly, pricing many creditworthy borrowers out of the marketplace.