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Finance, Housing Finance

The Trump Administration Can Make Housing More Affordable By Letting The QM Patch Expire

The Wall Street Journal reports that the Treasury Department is “putting the finishing touches” on a plan to return Fannie Mae and Freddie Mac to private-shareholder ownership. According to the report, if this plan is carried out, “the companies could return to a status similar to how they operated before the financial crisis.”

Allowing these companies to operate in a fashion even remotely similar to how they did before the crisis would be a tragic mistake.

What’s really needed is for Washington to end, permanently, the government-protected duopoly of Fannie and Freddie. Unfortunately, Congress has showed no real interest in doing so.

Through the Consumer Finance Protection Bureau, the Federal Housing Administration and newly appointed Federal Housing Finance Agency Director Mark Calabria, the administration can, however, take some useful steps on its own to replace the companies’ role in housing finance with private firms—provided, of course, that Treasury’s “finishing touches” won’t get in the way.

Whatever Treasury’s plan may be, reforms that shrink the government’s role cannot come soon enough for people who need more affordable housing. All Fannie and Freddie did before the financial crisis – and all they do now – is incentivize more and more housing debt, making homes more expensive.

AEI’s newly released housing price data show exactly how harmful these government policies are, especially for folks with lower income. From 2012, the lower price tier of homes has seen the most appreciation of all the tiers: nearly a 60 percent rise in prices. Those at the higher end of the market, on the other hand, have increased only about 15 percent, with relatively little appreciation since 2017.

READ MORE:  How non-implementation of local building materials’ policy is worsening housing delivery

Source: Forbes

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