It’s a tough time to be an employee at Fannie Mae and Freddie Mac—especially if you’re looking for a raise. It’s tougher still to figure out the logic behind some of the decisions being made by their conservator, the Federal Housing Finance Agency (FHFA).
Back in January, the National Multi Housing Council held its annual meeting at a resort in Boca Raton, Florida. And multifamily executives from Fannie Mae and Freddie Mac attended the meetings, as they do every year.
But this year was different. This year, they were forbidden by FHFA to stay at the resort. It was too ritzy, too ostentatious, FHFA figured: It would look bad for companies that are living on the public dime. So, the conservator ordered Fannie and Freddie execs to stay at a more humble nearby Homewood Suites.
And here’s the punch line: the rooms at the Homewood Suites cost more than the rooms at the Boca Raton Resort and Club. FHFA made Fannie and Freddie spend more taxpayer money to make it look like they were spending less. This is madness, and makes me mad as hell, both as a taxpayer and as a thrifty traveler—haven’t they ever heard of Priceline.com?
Seriously, the multifamily operations are the best thing about the government-sponsored enterprises (GSEs), raking in billions in profit since the conservatorship began. But the sins of the single-family side of the house (which is 95 percent of the house, after all) are constantly visited on the multifamily side.
The hotel story is just a small illustration. What’s even more infuriating is that Fannie and Freddie are prohibited from starting new programs and products—even when it’s in the public interest to do so. A few years ago, at the height of the credit crisis, Freddie Mac wanted to start a small loan program, and another program focused on manufactured housing. And even though those programs would’ve been “mission rich” and served a higher public purpose, FHFA shot it down—the rulebook says ‘no new programs’ so that’s that.
And now, as FHFA rolls out its REO-to-Rental program, Freddie Mac is working on a new scattered-site mortgage program that would enable more investors to buy more single-family houses more quickly. Will that program see the light of day? Will FHFA shoot itself in the foot by shooting down the program?
What do you think? Is FHFA handling the GSEs correctly? If the federal government is going to commandeer the GSEs, shouldn’t Fannie and Freddie be compelled to serve the public interest? Should they really just be left to “wither on the vine”? We’d love to hear your thoughts in the comment section below: