Published December 14, 2012
WASHINGTON – Bank of America Chief Executive Brian Moynihan on Friday said the taxpayer-supported mortgage giants, Fannie Mae and Freddie Mac , should not be eliminated as policymakers calibrate the right balance of government support for home buying.
Regulatory uncertainty is holding back the return of private capital to the mortgage market, Moynihan said. But he cautioned that Fannie and Freddie should not be eliminated without first building a housing finance system for the future.
Moynihan, in remarks before a panel at the Brookings Institution in Washington, said that a government withdrawal that goes too far would put homeownership out of reach for many borrowers. Some of the "the old assumptions" designed to support home buying should be revisited, and there are steps that can be taken to ease the government out of the market, he said.
"I don't think changing Fannie and Freddie in some abrupt fashion is wise policy," he said. "We need Fannie and Freddie. They are critical to the transition."
The Obama administration and Congress have yet to decide on a specific option for weaning the mortgage market from its dependence on the government. A transition to a new housing-finance system is likely to take years, and lawmakers have yet to endorse a long-term option.
However, both Republicans and Democrats have called for the government to shrink and eventually wind down Fannie Mae and Freddie Mac, the companies that helped fuel the housing bubble before being walloped by investments in subprime mortgages.
Fannie Mae and Freddie Mac, which together have drawn almost $190 billion from the Treasury since they were seized by the government in 2008, are at the center of the debate over how to fix the mortgage-finance system.
"A healthy market needs private capital so the government - and the taxpayer - doesn't take all the risk," Moynihan said. "Access to credit is critical."
With higher hurdles to obtain homeownership in the wake of the financial crisis, he said lenders need to ensure buyers are credit-worthy and that owning still might be out of reach for many Americans.
"As the housing market strengthens, now is the time to have this dialogue in earnest so we can reset to a more secure, sustainable system for all the players involved," he said.
Moynihan said Fannie Mae and Freddie Mac are not the only players providing mortgage money that might need to reassess their missions to supply liquidity for the housing market, and suggested the Federal Housing Administration should return to its focus "of providing credit to low to moderate income borrowers."
Combined, the FHA, Fannie and Freddie back 9 out of 10 mortgages used for home purchases.
(Reporting By Margaret Chadbourn and Rick Rothacker; Editing by Nick Zieminski)