I have an op-ed in the Washington Times that has a simple message: its time for the Republicans and the President to join forces and shut down Fannie Mae and Freddie Mac. The administration's housing finance proposal is confused when it comes to what it wants for long-term reform, but on what to do with the mortgage finance giants that have helped wreck out economy, there is little held back. I think we can get rid of Fannie and Freddie faster than Treasury suggests. But they have three critical pieces there.
So, what do we do? First, House Financial Services Committee chairman Spencer Bachus made the correct first step by proposing the GOP sit down with President Obama to find a way forward. Second, since housing finance reform can not wait, there are things Congress and President Obama can do right now that likely can garner bipartisan support. Here are a couple from my op-ed:
Fannie and Freddie, which were supposed to help low-income and first-time homebuyers, have expanded to the point that they now guarantee individual home loans of up to $729,500 in areas with high costs of living. Congress should quickly drop that amount to $575,000 or lower this year while also lowering the standard mortgage limit from $417,000 to $300,000 or less.
The federal government also needs to immediately stop guaranteeing loans with less-than-adequate down payments. As we await full reform of Fannie and Freddie, the feds should only back loans in which the buyer puts down the traditional 20 percent of the sales price.