Posted on 11/20/2013 8:17:09 AM PST by whitedog57
As Congress mulls over the “reform” of Fannie Mae, Freddie Mac and even the Federal Housing Administration (FHA), it is important to remember that these entities are INSURANCE COMPANIES that compete directly with private mortgage insurers like MGIC. So when we consider housing finance “reform,” consider the debacle from the recent “reform” of insurance: The Affordable Care Act.
Please visit the Affordable Care Act (aka, Obamacare) at this site and try to enroll.
Another similarity between housing finance reform and healthcare reform is that they are both focused on “affordable” delivery on housing finance and healthcare. The Corker-Warner Senate legislation has an affordable housing mandate in it which President Obama has already stated isn’t big ENOUGH.
To be fair, housing finance “reform” began during the Great Depression under President Franklin Delanco Roosevelt with the creation of the Federal Housing Administration and Fannie Mae. But it really wasn’t until President Carter with the Community Reinvestment Act (CRA) and President Clinton with the National Homeownership Strategy (aka, The Affordable Housing Dream Act) nhsdream2 that the (un)affordable housing efforts gain serious traction.
Of course, dreams quickly become nightmares when the government tries to regulate the insurance industry AND stimulate home ownership and insurance purchases. [I won't go into detail on the Obamacare fiasco such as 1 million Californians losing their heatlhcare coverage because of Obamacare].
Why? Obamacare is similar to a government mandate that everyone purchase a top-of-the-line Cadillac Escalade. The Platinum package (how ironic) tops $80,000. Even if I don’t WANT a Cadillac Escalade. I may want a small car and don’t want leather seats. But that is the problem with Obamacare (or ONE of the problems) — it forces me to purchase something for a high price and high deductible that I don’t want.
In the same vein, housing finance reform suffers from the same twisted logic. Housing finance reform will require the preservation of the 30 year fixed-rate mortgage, even if I want a pay option adjustable rate mortgage (ARM). Dodd-Frank and the Consumer Financial Protection Bureau have taken care of exotic mortgages in the name of consumer protection … and affordability. President Obama really wants to keep the 30 year fixed-rate mortgage for consumers, even if is more expensive than a 5/1 ARM. Even worse, as Mike Lea and I have pointed out, you pay for the option to prepay with the 30 year fixed-rate mortgage even if you have no intention to prepay your mortgage!
In other words, the 30 year fixed-rate mortgage is like the Cadillac Escalade – it is expensive and has features you many not want. But housing reformers assume that you must have a 30 year fixed-rate mortgage (although they will allow plain vanilla ARMS like the 5/1). ARM share according to the Mortgage Bankers Association is only 7.4%.
And don’t forget cronyism. The horrendously expensive Obamacare rollout was loaded with pork for government cronies (like Michelle Obama’s Princeton buddy and CGI officer): CGI received $94 million for the Obamacare website, which STILL doesn’t work.
Housing reform with an affordable housing mandate (like Corker-Warner) is a political cookie jar allowing politicians and cronies to raid the cookie jar whenever they choose. Look at what happened to Fannie Mae and Freddie Mac. And remember cronies like Barney Frank, Jamie Gorelick and assorted others who helped contribute to Fannie Mae and Freddie Mac’s downfall (not to mention taxpayers)? [See Josh Rosner's "Reckless Endangerment" for an excellent analysis].
affordgoals (1)
So, the Affordable Care Act and affordable housing reform are one in the same. Government takeover of insurance companies to require us to purchase something we don’t want — at someone else’s expense.
Hint: The House’s PATH act is far better than Corker-Warner … and I would like to see something without ANY government guarantees in it.
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