Conservatorship of mortgage giants Fannie Mae and Freddie Mac is absurd and jeopardizes the U.S. economy, Housing and Urban Development (HUD) Secretary Ben Carson said during an exclusive interview on FOX Business on Thursday.
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“Freddie and Fannie have been in conservatorship for going on 12 years now – that’s ridiculous,” he told Maria Bartiromo. “It puts the taxpayers at additional risks.”
President Trump issued a memo on Wednesday regarding the overhaul of the mortgage giants in addition to ordering HUD to develop a new plan to finance new homes. Carson said that HUD, alongside the White House and Treasury Department, would work to “preserve the American dream” while protecting taxpayers.
“We have to be looking at different ways to do things and ways to bring private capital into the market,” he said. “There needs, obviously, some kind of government guarantee or backstop, but this is not the correct forum for doing that and we are going to be engaging in deep discussions, all the factors in government.”
Fannie and Freddie were bailed out for nearly $200 billion during the 2008 financial crisis. The goal of the two government-sponsored enterprises is to make mortgages more affordable to homebuyers. But instead of offering loans, they purchase and guarantee them from lenders. Carson said although the private sector does “very good with lending” they would be “exorcising the appropriate amount of oversight” in order to avoid future mistakes.
“We need to learn from the things that have happened before,” he said. “We need to understand, for instance, that putting people into a house that they can’t afford is not doing them a favor; they lose the house; they lose the credit and they lose their future options. We have to find better solutions for that. And wise people learn from mistakes.”
Although housing has been one of the weaker spots in the economic recovery, Carson said growth will take time, because people want to make sure that the economic gains seen over the last two years are real, but the housing market is on the path to success.
“You’ll see the fluctuation from month to month,” he said. “What does it all mean? We’re all moving in the right direction if you take the conglomeration of all the numbers.”