7/25/2008
Fannie and Freddie: From Our Friends to Our Masters
As Houston realtors, lenders and real estate investors, readers of HoustonRealNews believe we perform some pretty important functions in generating wealth for Houston homeowners.
With the bailout of Fannie and Freddie, President Bush and Congress are telling is we just don't matter that much.
Fannie and Freddie started as a service to the financial markets to help real estate transact - providing liquid MONEY for new homeowners trying to purchase and existing homeowners (and builders) trying to sell.
Today, we learn they are "too big to fail". See, if they fail, the real estate market will lose the money that helps it transact so efficiently.
We understand the argument.
But we know more. We know the hard-working men and women in the real estate industry can do better. We know that if unshackled by competition from government sponsored entities, our constituents, our readers would find a way to help real estate transact. We know the market better than Fannie and Freddie ever could.
We see the houses, we meet the people involved in the transactions. We know our neighborhoods, we know their problems and we know their gems.
Fannie and Freddie did a fantastic job of consolidating risk to the American taxpayer - also us by the way - and handing the taxpayer guarantees to Japanese insurers, Arab Oil Sheikhs, Wall Street and hedge funds to purchase mortgages.
Haven't we learned the lesson that Sumitomo Bank's Mortgage Backed Securities department has no real knowledge of Fondren, or houses in it?
That an appraiser's "best estimate" of value may no longer effectively collaterize debt?
That you, our readers, know more than an algorithm could ever tell a bank when it comes to evaluating the condition of a house and a borrower? [Full disclosure - our Publisher writes and publishes those algorithms and results.]
So, we now learn that our experience will now be subsidizing an organization that is "too big to fail" - instead of allowing us to build our own system based on our value, our expertise.
The federal bailout of Fannie and Freddie shows us who the government thinks really matters in real estate. And I can assure you, its not us - the people who do the work.
Let them fail. Let us succeed and make it better.
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