mortgage crisis

My favorite economist, Mark Dotzour from the Texas A and M Real Estate Research Center in College Station has some thoughts on the mortgage mess.

DOTZOUR: STEP ONE, RECHARTER FRANNIE
COLLEGE STATION (Real Estate Center) – As long as the federal government continues to indicate they are willing to redraw the promises contained in mortgage loans, investors will be wary of buying more mortgage bonds. Hence the interest rates on mortgages will stay higher than normal. That’s how the Real Estate Center’s Chief Economist Dr. Mark Dotzour sees the recent government takeover of Fannie Mae and Freddie Mac.

“Fannie and Freddie were doing a great job of providing low cost mortgages to a large majority of American families for three decades of the 20th Centrury. Somewhere in recent years, they lost track of their mission and morphed into the largest mortgage bond speculators on the planet,” said Dotzour. “They did this by veering away from their mission of ‘packaging mortgages’ into the risky waters of keeping mortgages and hoping they hold their value. That bet has completely failed, and now they become a part of the problem and not a part of the solution to the housing market.”

Dotzour outlines what he thinks should be done.

BACK TO ORIGINAL PURPOSE“First, they (Fannie and Freddie) should be re-chartered to their original purpose of serving as a conduit for mortgages. They shouldn’t be in the business of holding mortgages as investments.

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