FANNIE MAE

ANOTHER SWAMPY GOVERNMENT PROGRAM DOGE SHOULD KILL

Anyone remember 2008 and the housing market crash that took out 50% or more of our savings? Those already retired were hurt very badly; in most cases, they had no way to recover, as they weren’t able to secure a job to bring in more cash.

What was forgotten was the cause; giving loans to too many people who weren’t able to pay them off…ever. While it is a great goal to help more people obtain permanent housing, it isn’t the job of the government to stack the deck. Buying a home requires a lot of the homeowner; losing that battle can permanently scar them, more than if they had simply continued to rent. In fact, I know some seniors who to rent rather than have the responsibility to pay for, manage and maintain a home.

Stephen Moore’s Insights

Stephen Moore, writing as a visiting fellow at the Heritage Foundation, talks about the true backstory of that disaster. Politicians love to dole out favors and favorable treatment; it’s how they get elected and re-elected. But the cost can be extremely high and damage the country while a few appear to benefit. How many who experienced foreclosure and a significant loss in their credit ratings feel good about that period? While some knew that the “deal” was too good to be true, at some point, most of these homeowners knew they weren’t in a position to buy a home with their current income.

Moore wants to remind us of this forgotten time where the institution that lost the largest amount of money and needed the biggest bailout wasn’t your neighborhood bank; it was Fannie Mae. Fannie Mae has the backing of government insurance, guaranteeing federal mortgages. No one ever thought it would fail. Fanny Mae got nearly $200 billion of YOUR money. Let me repeat that: $200 billion.

They continue to rip us off from their cushy office space in Washington, DC, a nearly one million square-foot fancy building. Did you know the agency is still in conservatorship? So many years ago, Fannie hasn’t figured out how to become solvent enough to be released from the Federal Housing Finance Agency oversight.

Moore notes that despite their position as an agency needing extreme oversight, they instead wish to expand their reach by effectively removing title insurance on federally-backed loans. Instead, they claim they will replace title insurance companies. This will result in many billions of dollars of new risk for us, as we are the backstop for them. How good a job will they be willing or able to do in making sure that your home title is clear? I’m not feeling it. Yes, let’s take a well-run business, cancel it and give the responsibility to the government. Looking at government-run schools, you can see that “the government” tends to mess up everything it gets its hands on. We see this with the incredible success home schooling provides over public schools, even given that most parents have no idea how to be teachers. But they often do better than the many who claim to know what they are doing. (I do love the great teachers I have had; don’t get me wrong. But there simply aren’t enough of them.)

Fannie’s “goal” in this effort is to bring down the price of buying a home. Title insurance is typically a one-time fee of 0.5% to 1% of the purchase price. It’s not much to make sure that your home is actually yours. Biden (or whoever was actually running the country) was on board with the idea of giving them this power. He was sold a bill of goods that this wouldn’t have any impact on taxpayers. They lie!

Before 2008, Fannie Mae commissioned studies that appeared to show that they had a VERY low risk of going bankrupt. How’d that work out for us? We can’t afford government so deeply involved in the business of home ownership. They cannot get it right. Our best bet, and the actions of DOGE, are to get the government out of the things it does badly. Not give them more power.

The Answer

As the guarantor backing banks, let’s put banks back in the business of doing the loan-making and kick Fannie to the curb. Just like the federal student loan program, the way the government manages things makes no sense. Banks would not give out “liar” loans, no-down-payment loans or other kinds of loans they were likely to lose money on. And that’s the way it should work.

The more we get the government out of our business, the lower the price of housing will become. If it takes you 3-5 years to build property, you won’t build it often and you’ll have to charge top dollar to make any money on it. Privatization is the answer. There’s no housing “free lunch,” even as politicians wish to pretend that they can fulfill this.

As the Biden rule came to a crashing end, Fannie Mae tried another federal takeover pretending it would make houses cheaper. We might hope it would die with Trump, but you have to watch the Feds; they don’t give up easily. As usual, they pretend it won’t cost us anything, but is there anything that the government does that doesn’t end up hitting the taxpayer? They are a cost center, not a profit center. If we don’t kill it, we may find ourselves again bailing out Fannie Mae. Never again. This is not our responsibility. If politicians want government to control so much, they should pick up the bill when it comes due, not us.

“We won’t get fooled again.” - The Who