NAHB: Explicit federal backing of GSEs will reduce mortgage ratesMortgagePress.comNAHB, GSEs, Fannie Mae, Freddie Mac, home builders, Housing and Economic Recovery Act of 2008
To support the mortgage markets and bring down mortgage rates,
the nation's home builders have called on federal officials to
clearly affirm that the government will provide long-term
guarantees for the debt and securities purchased by Fannie Mae and
Freddie Mac.
Investors are confused over the extent of federal support for
long-term obligations held by the housing government sponsored
enterprise (GSEs) and that uncertainty has pushed spreads on GSE
debt in relation to Treasury yields to record highs, Jerry Howard,
president and CEO of the National Association of Home Builders
(NAHB), said in a letter to Treasury Secretary Henry Paulson and
Federal Housing Finance Agency Director James Lockhart.
"As a result, mortgage rates are at unacceptably high levels,
which is forestalling recovery of the housing market and creating a
major drag on the economy," Howard added.
Under the provisions of the Housing and Economic Recovery Act of
2008 (HERA), Treasury's temporary and unlimited authority to
purchase GSE debt and equity and ensure that Fannie Mae and Freddie
Mac have continuous access to liquidity on an as-needed basis, will
end on Dec. 31, 2009.
Markets are unsure of the extent of federal support for the GSEs
beyond that date. Additionally, the Federal Deposit Insurance
Corporation's recent guarantee program for senior, unsecured debt
has caused investors to view those obligations as more secure than
GSE debt.
"This misperception has resulted in wider long-term senior debt
spreads for the GSEs, which has, in part, raised mortgage rates to
unnecessarily high levels," said Howard.
To bolster investor demand for GSE securities and thereby reduce
mortgage rates, NAHB is calling on the Treasury to resolve investor
uncertainty by explicitly guaranteeing GSE debt in the same way the
FDIC has provided guarantees for bank debt. In addition, Treasury
should increase its purchases of mortgage backed securities issued
or guaranteed by Fannie Mae and Freddie Mac as authorized under
HERA.
For more information, visit www.nahb.com.
