Wednesday, October 27, 2010

Corker pledges to take role in home loan regulation

Speaking to real estate agents, bankers and brokers frustrated with a four-year housing slump, U.S. Sen. Bob Corker, R-Tenn., criticized heavy-handed government regulation and pledged to take a leading role in planning the future of home loan financing.
"Regulators are over-regulating,'' Corker said Tuesday at a housing panel he convened at the downtown Nashville library. "When times are good they get too loose and happy. Then things happen, there are bank failures and they over-regulate. I think that's what happening in Tennessee."

Brokers at the meeting complained of difficulty getting even good borrowers approved for home loans. One complained: "The medicine has been killing the patient."

Corker, a member of the Senate Banking, Housing and Urban Affairs Committee, said he was open to suggestions on how to reform home loan financing, in particular, mortgage giants Fannie Mae and Freddie Mac.

The two entities — now controlled by the government — have cost taxpayers $135 billion and could cost $259 billion through 2013, the Federal Housing Finance Agency projected last week.

That's a cost far greater than the bailout of other financial institutions and the auto industry.

Fannie Mae and Freddie Mac buy loans from lenders, package them and guarantee them for investors, and they have taken heavy losses as foreclosures have mounted during the recession.

"My question is, why is the government involved at all in mortgage loans?'' Corker asked the crowd, which met his question with applause.

Fannie Mae and Freddie Mac grew under Democratic and Republican administrations in the past — and they operated with an implicit government guarantee. But after they were crippled by the weight of bad mortgage loans, the Obama administration and a Congress perhaps reshaped by next Tuesday's fall elections will have to figure out what to do with them.

Corker said the Obama administration's plan to deal with the future of those institutions is due in January and will be a subject of debate for Congress.

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