Letters to the Editor: Fannie Mae Answers Back
Your Aug. 24 editorial "Fannie Mug" presents an argument about the role Fannie Mae plays in mortgage finance that is plainly wrong. You also make a proposal for an alternative mortgage finance system that is just wrongheaded.</br></br>For more than 50 years, Fannie Mae has served every region of the country, at all times, in good housing markets and bad, bringing lower cost mortgage rates to Americans of modest means. The average annual saving to the homeowner whose loan we buy or securitize amounts to nearly $400. This year alone we will serve two million American families and add substantial liquidity to a mortgage market that will see an astounding $700 billion in new originations. We are the largest private investor in multifamily housing, and 18 months ago announced a commitment to purchase $10 billion in loans by the end of 1994, specifically targeted to low- and moderate-income families. Finally, largely because of Fannie Mae and Freddie Mac, there has been no credit crunch for home buyers throughout the recession.</br></br>Yet you propose scrapping the current smoothly functioning mortgage finance system of which we are a part. It would be replaced by one that would lead to higher mortgage rates and severe liquidity problems. Substituting Fannie Mae's role in mortgage finance with a purely private system may satisfy a theoretical and ideological goal. It would, however, deny consumers the advantages they now have, and subject them to a new system whose effectiveness has not yet been tested.</br></br>Consumers would no longer be served by companies like Fannie Mae and Freddie Mac, which are limited to one industry-housing finance. Instead, the market would be served by companies able to pick and choose whether, and at what price, to fund homeownership. The mugging mentioned in the title of your editorial would surely take place, and the home buyer would be the victim.</br></br>You implied that we receive a $4 billion federal subsidy. No fewer than five studies by the Office of Management and Budget, the General Accounting Office and the Congressional Budget Office have found that any governmental benefits we receive flow directly to consumers. The risk-based capital requirement in the pending "government-sponsored entities" legislation is, contrary to the editorial's assertion, far tougher than bank and thrift risk based standards. It requires us to capitalize against credit and interest rate conditions so severe that were those conditions to become real, they would amount to nothing short of economic catastrophe for the nation, not just Fannie Mae.