fannie, freddie, and the future

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From the news reports I've read, it seems clear that Fannie Mae and Freddie Mac will soon be put out to pasture. The institutions that for decades underpinned the American home mortgage market played a significant, though apparently not decisive, role in the financial crisis and are now deeply in hock to the taxpayer. What life after Fannie and Freddie will mean to architects, builders, homeowners, and home buyers is less clear. For one thing, there are competing plans for winding down Fannie and Freddie without freezing up mortgage markets still recovering from the shock of the crash. More significantly, though, Fannie and Freddie have been around for so long (since 1938 and 1970, respectively) that most of us have taken them--and federal support for the housing market in general--mostly for granted.

The best in-depth discussion of the matter I've come across is this On Point radio report from Boston's WBUR. My take-way from that story is that, whatever structure succeeds Fannie and Freddie, mortgage finance will harder to come by. The 30-year, fixed-rate mortgage may become a thing of the past. With change of that magnitude in the offing (and the mortgage interest deduction up for grabs as well), we can expect a very different housing industry than the one we--not to mention our parents--grew up with.

I've been trying to get my arms around that idea for the past week or so, and I woke up this morning thinking that we may end up seeing benefits from all this. Federal support for housing, which grew, like so many social programs, out of the Great Depression, has been enormously successful in making home ownership affordable. But efforts on such a massive scale are bound to have unintended consequences. Federal support for agriculture has yielded a stable, affordable food supply for decades, but it is also implicated in the spread of obesity and other ills. Federal support of the housing industry has brought home ownership within the reach of many people who would, without it, be renters. It has also distorted the market in ways that led to suburban sprawl and a kind of architectural "obesity" with which we are all familiar.

The passing of Fannie and Freddie may herald an era of declining home ownership and a new generation of middle-class renters. That may not be a bad thing; there are plenty of civilized countries where renting is far more prevalent than here. But I can also imagine the U.S. housing industry responding in innovative ways--building smaller, more energy efficient houses; refitting oversize suburban houses as multifamily dwellings; perhaps getting more involved in providing financing for their buyers--that will keep both it and the American model of home ownership alive and, perhaps, healthier than they were before the crisis. --B.D.S.




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