WASHINGTON — The Obama administration got what it was looking for Tuesday at its summit on the future of housing finance: big ideas that ranged from a government-sponsored refinancing of millions of mortgages to blowing up the structure that has backstopped mortgage lending for decades.
Tuesday’s summit, in the Treasury Department’s ornate Cash Room, was a starting point for a debate that will unfold in the months ahead and carry consequences for all Americans.
How this debate is decided could affect, among other things, the supply of affordable rental housing, tax deductions for mortgage interest and whether Americans pay significantly more to be homeowners.
The process that began Tuesday also is likely to spell the end, at least in their current form, of mortgage-finance titans Fannie Mae and Freddie Mac, which have been in government conservatorship since September 2008.
Treasury Secretary Timothy Geith ner put down some wide markers Tuesday on what he envisions for mortgage finance.
“We will not support returning Fannie and Freddie to the role they played before conservatorship, where they fought to take market share from private competitors while enjoying the privilege of government support,” he said in introductory remarks. “We will not support a return to the system where private gains are subsidized by taxpayer losses.”
Fannie Mae and Freddie Mac are congressionally chartered private entities that buy mortgages originated by lenders and pool them into bonds backed by U.S. mortgages. For decades, this has freed banks and other mortgage lenders from having to retain the loans on their books and allowed them to keep lending.
The administration hasn’t said what it will propose to Congress by January. The summit was intended to gather ideas and reaction from those involved in mortgage finance.
The summit began with a bang when Bill Gross, the managing director of Pimco, the world’s largest bond fund, proposed that the Obama administration order Fannie Mae and Freddie Mac to refinance all outstanding mortgages that they back or guarantee into today’s historically low interest rates.
Doing so, he reasoned, would free up a significant amount of income for millions of Americans, who then could boost the economy by spending that additional disposable income.
