GSEs: Under-serving or un-deserving?
Alongside growing calls for stronger GSE regulation, HUD’s recent testimony (pdf) regarding GSE affordable housing performance is sharply critical of GSE performance:
Therefore, even though the GSEs had achieved each of the housing goals under the previous regulations, the GSEs, in fact, continued to serve less of the affordable housing market than was served by conventional conforming primary market lenders during those years.
According to HUD, GSE were less effective than ‘unadvantaged’ lenders in promoting first-time homeownership:
First-time homebuyers accounting for 25.9% of the GSEs’ combined total purchases of home loans during the 2001-2003 time period, compared to 39.1% of home loans originated in the conventional conforming market.
HUD leaves no doubt that …
… it thinks that the GSEs should not merely match the market, but lead it:
The GSEs’ state-of-the-art technology, staff resources, share of total conventional conforming market, and financial clout strongly suggest that they have the ability to lead the industry in making home purchase credit available for underserved families and communities. They are well positioned to lead the industry with innovative products that effectively remove traditional barriers to homeownership, especially for minorities and first-time homebuyers.
Compared with these striking statistical findings, HUD’s conclusion seems embarrassingly tepid:
HUD’s recent final rule, which will promote new homeownership opportunities … continues a long tradition of support for the Nation’s housing markets.
Others, perhaps egged on by Fannie Mae’s structural critics, were eager to accuse:
It turns out that on top of fudging profits and bestowing gaudy pay packages on its executives, mortgage giants Fannie Mae and Freddie Mac deliver fewer benefits to home buyers than most had believed. Recent studies and news stories reveal that the firms charge consumers unnecessary fees, and that the widely held assumption that Freddie Mac and Fannie Mae hold down mortgage rates may not be valid.
