Former Federal Reserve Chairman Paul Volcker states that the nation’s home mortgage market is in trouble and will have to be “reconstructed.” The statement comes from an interview with Bloomberg Television in February, 2010.

Regarding the mortgage market, Volker states, “It’s totally dependent, heavily dependent on government participation.” Volcker goes on to say that it shouldn’t be that way and that  the mortgage market is going to have to be reconstructed.

This state of affairs has no small bearing on small business and marketing. The financial condition of the U.S. mortgage market is heavily tied into the economy. There is hardly a business in existence today that isn’t feeling the effects of this situation. It affects businesses and marketers who use mailing lists and mortgage leads to promote their products and services.

In an article at the Huffington Post (http://tinyurl.com/yaznzsj), Guy Cecala, is discussed in addition to Volcker. Cecala is the publisher of a leading industry publication, Inside Mortgage Finance. In the article Cecala points out that the federal government was responsible for up to 95 percent of all new home mortgages in the fourth quarter of 2009.

In an interview with Cecala, he points out that anyone who looks at the numbers can see what it’s come to – namely that the Federal Government is backing most of the new mortgages in the U.S. That’s a lot of exposure.

Watch the Bloomberg interview with Volcker:

Although Volcker is hoping the country’s home mortgage finance system will lessen its dependency on taxpayers, Cecala pointed out that it’s going to be almost impossible for any meaningful change to take place in the coming year.

According to Cecala’s firm, in the last quarter of 2009 there were $390 billion in new mortgage originations, including home equity lines. If home equity lines are excluded, the federal government stands behind up to 95 percent of those mortgages. These mortgages are held by Fannie Mae (FNMA), Freddie Mac (FMAC), the Federal Housing Administration (FHA) and the Veterans Administration (VA).

Cecala emphasizes that the government was responsible for only about 40 percent of all new home mortgages a few years ago. This is a big difference.

House Financial Services Committee Chairman Barney Frank (D-Mass.) recommends an overhaul of the country’s taxpayer-supported system for financing home loans.

Last month, Representative Frank offered up the following solution. His committee will be recommending to abolish Fannie Mae and Freddie Mac in their current form. He recommends coming up with a whole new system of housing finance.

Later this year the Obama administration is expected to outline its future plans for Fannie and Freddie.

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