- Tino Diaz
Independence Day or Intervention Day?
As we celebrate our nation's independence, we keep thinking – should we create a new day to celebrate in America? Nothing really compares to the 4th of July as America celebrates its freedom, liberty, independence, and our right to the “Pursuit of Happiness”.
But we’re wondering where that “Pursuit of Happiness” has gone for many. The University of Michigan Consumer Sentiment Survey published at the end of June showed the lowest Consumer Sentiment ever recorded. Nobody has to tell the general population how bleak that sounds or feels. But in the housing and homeownership sector…it could easily get worse if key policymakers don’t take swift action.
Don’t Constrict The Housing Opportunity
This is a complex problem with a simple solution. The gist of it relates to the conservatorship of Fannie Mae and Freddie Mac (the GSEs). Since 2008 they have been under the control and ownership of the US government. In 2021 an Amendment was made to the original contractual agreement that placed the two GSEs under government control. The original agreement was called the “Preferred Stock Purchase Agreement” (PSPA). The most recent Amendment to the PSPA is aimed at having these GSEs accumulate more capital in order to return to (private) independent ownership. The prior Administration made this recent Amendment - particularly the Treasury Department and the Regulator of the two GSEs, the Federal Housing Finance Agency (FHFA).
The Amendment will severely limit the mortgage loans that Fannie and Freddie can buy to limit their risk positions. Setting aside the arguments on whether or not this ever made any sense, today, with rapidly rising home prices and rising mortgage interest rates, among other challenges, it does not!
Home Financing is Stressed
One provision of the charters of Fannie/Freddie is to provide liquidity to the housing finance system when the housing financing market is stressed. Some estimate that 4 million potential homebuyers cannot afford to buy now because mortgage interest rates are at 6% versus the 3% level of just a couple months ago.
That is just one stress factor putting homeownership percentages at historically low levels. Now is the time for Fannie/Freddie to fulfill their charters and expand financing support for these potential homebuyers. No, we don’t want to see bad loans being made – or abusive or predatory practices. But consumers are feeling the stress of a constriction of opportunity, more anxiety, and more uncertainty. And it can be addressed!
It is NOT the time to limit the availability of low downpayment financing or to only make homeownership available to those with the highest credit scores or the highest incomes. If this recent Amendment ever gets implemented, it would do exactly that.
Last year the opposition to this Amendment by the AHA and others was sufficient to have the implementation of the Amendment suspended. However, the suspension is due to expire in September 2022. This is another ‘shark’ in the water for homebuyers that needs to be eliminated – especially with so many other challenges.
The solution is simple: The US Treasury and the FHFA should eliminate this Amendment to the Preferred Stock Purchase Agreement now.
That is one step of intervention that might improve the numbers in the Consumer Sentiment Survey. We keep wondering….should we have a National Intervention Day to celebrate the day we force policymakers to change so many things that are broken? It’s great to celebrate Independence Day. But if we want to change the declining consumer sentiment…we’ll need to describe the intervention steps necessary to change course and force policymakers to take action. It’s another reason we need more voices. It costs nothing to join America’s Homeowner Alliance. Your voice is essential for change. It may cost “The Pursuit of Happiness” if you don’t!
Please join our growing crusade at -- www.myaha.com – membership is free for a lifetime!