Another Reason to Dump Fannie Mae
Earlier this year Fannie Mae took an unprecedented step in its involvement in the housing market through a $1 billion dollar deal with Invitation Homes, the country’s largest single-family home rental company. Jointly with Wells Fargo, Fannie Mae will provide government-backed financing for this Wall Street giant’s rental portfolio.
For the first time ever Fannie Mae has backed the debt of an institutional owner of a single-family rental homes. Historically, Fannie Mae provides taxpayer-backed guarantees for multi-family rentals, largely with small investors–not a corporate behemoth like the Invitation Homes.
Rightly so, the deal has sparked criticism from various interest groups and nonprofits concerned with cronyist preference made by the government sponsored enterprise (GSE). Indeed, the CEO of the National Association of Realtors (NAR), accused Fannie Mae of funding “special interest deals with Wall Street firms” at the expense of Fannie’s public mission to increase homeownership.
The National Community Stabilization Trust (NCST) also criticized Fannie’s involvement given the ample supply of private financing available. This begs the question as to why “Fannie Mae place[s] a taxpayer guarantee behind the same private interests whose risky practices led to the millions of foreclosed homes they are now buying up.”
Both groups ought to condemn Fannie Mae’s further involvement in destabilizing the housing market – intervention that ultimately expands the government’s footprint in the U.S. housing system.
Unfortunately, they miss the mark when it comes to the solution given both groups support the role of GSEs in the housing market. GSEs, like Fannie Mae, have a proven track record of failing to increase homeownership, while inducing unsustainable levels of mortgage debt and increase housing prices.
Given GSEs distortion of the market, advocacy groups such as the NAR and NCST would be better off to rethink their support of Fannie Mae. How many crises will it take to learn that this kind of government intervention leads to taxpayer bailouts? It’s time Congress end GSE interference in the market, get taxpayers off the hook of backing residential mortgage debt, and lead the U.S. toward a durable and sustainable housing finance system free from cronyist intervention.