Fannie Mae, Freddie Mac and Missing Real Estate Agents

It is unfortunate that the Obama administration -- you know, the most transparent administration ever? -- did not allow recording devices or cameras for broadcast into yesterday's Conference on the Future of Housing Finance. By all appearances, it promised to be high political theater, by which I mean that the entire thing was likely carefully scripted from the start. My partner, Jeff Corbett, expressed some skepticism about the proceedings in an earlier post on HousingWatch.

Forgive my cynicism but, again, most of these panelists were smack in the middle of the housing boom, enabling -- even perpetuating -- what became a bursting bubble. Are these the same people we want directing policy, going forward?

And where were the representatives for the nation's real estate agents?

By the time you read this, the circus will be over, and apart from some deeply buried mention in page C17 of the national newspapers, we're not likely to know what truly went down for quite a few weeks and months. But as some in politics like to say -- in Internet-speak -- the optics are not "the roxxorz" (the be-all and end-all) for the future of housing.

First of all, Secretary Donovan is on record as wanting to scale back homeownership. He moderated the panel titled Broader Housing Policy Goals. Why is he moderating? Shouldn't he be listening carefully to the experts who are gathered, seeing as how he's the primary policymaker who will be making the decision? Isn't the entire conference, in a sense, for his benefit (and Secretary Geithner's)?

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That secretaries Geithner and Donovan were moderating, rather than listening, suggests to me that the decision has already been made. The purpose of the conference is to ensure that the "right" experts say just the right things to support the fait accompli decision to scale back homeownership in favor of federal support of rentals.

Second, notice who was speaking on the panels and who was not. The National Urban League is speaking, presumably about how the mortgage meltdown has disproportionately impacted African-Americans. So is Michael Stegman -- whose business card must be crowded indeed, as he is the director of policy and housing for the Program on Human and Community Development of the John D. and Catherine T. MacArthur Foundation. Then there were a couple of academics and a couple of bankers, whose institutions are regulated by (and these days, funded by) the Treasury Department.

Who was not speaking at a conference about housing policy? Well, the National Association of Realtors was conspicuous in its absence, considering that it is the largest trade association in the country, with over 1.2 million members who are directly impacted by any housing policy issues. The National Association of Home Builders was also notably missing; one would think that the people who build homes for a living might have a thought or two about housing policy. Given their biases, one might think that experts from those two associations might have views that differ, from the handpicked panelists, on what federal housing policy ought to be.

The inclusion of the American Enterprise Institute was interesting, as they tend to be pro-market people and widely viewed as a conservative Republican organization. But they are also the people behind this treatise which makes two major recommendations: eliminate the mortgage interest tax deduction, and incentivize local municipalities to ease building restrictions. I imagine that the Obama administration will split the difference and adopt half of the "conservative" solution in order to proclaim that they are taking Republican ideas seriously. Guess which recommendation will be accepted and which will be rejected? If you think the mortgage interest deduction will survive past 2012, you're far more of an optimist than I am.

And what do the real estate agents generally want in a new housing policy? I discuss them in greater detail (and at far greater length) over on my blog, and the comments by working Realtors are interesting to read. On the whole, they appear to want the government to simply stay out of futzing with housing at all. Reform Fannie and Freddie, by all means, but those are government-created entities now well on their way to becoming a quasi-government organizations like the FDIC and the CPB. (This, by the way, is the official recommendation of the NAR; it isn't clear to me how many of its rank-and-file members really support such a thing.) Perhaps in future columns, we'll examine some of the fallout from yesterday's play in three acts.

Here's what I expect to come out of the housing finance summit (keep in mind that I'm not a lobbyist, nor a Washington insider):

• Blame will be spread around to everybody, and it will be declared that the nation's housing policy needs urgent reforms.
Fannie and Freddie will come in for a beating.
• There will be much gnashing of teeth about how badly these homeowners were hurt by the foreclosure crisis, and that they all would have been better off continuing to rent instead of buying a home.
• The experts will all loudly proclaim that there needs to be a private-public collaboration on housing.
• The mortgage interest deduction will be roundly vilified, setting the stage for its repeal.

What I am interested to hear, however, is to get some more substance behind the Obama administration's policy of "sustainable homeownership." What exactly does this phrase mean? What are the contours of such a policy? Are we looking at higher down-payments? Higher rates? No federal support for mortgages period, or just low-income mortgages? We've seen some of the outline of the policy for supporting rentals, at least for low-income families. But what does such support look like, for what would today be considered middle-class, affordable-housing buyers, and who tomorrow will become renters instead?

The political theater of the absurd that took place yesterday was a puppet show in support of a done deal. The real drama begins in the coming days as the elites in New York, D.C. and elsewhere try to figure out what to do about housing. Stay tuned and hold on; we live in interesting times.

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