Outlining his second-term plan to overhaul the nation’s housing finance system, President Obama during a visit to Phoenix today will urge lawmakers to limit the government’s role in the U.S. mortgage market.
Speaking at the epicenter of the housing crisis, the president will lay out proposals aimed at curbing the financial control of mortgage giants Fannie Mae and Freddie Mac, the agencies that back up the nation’s mortgage system.
Fannie and Freddie collapsed in 2008, but were bailed out by the federal government with roughly $200 billion in taxpayer money.
“They had a model for getting loans to the American people that didn’t work. It was basically, heads they win, tails taxpayers lose model and so what the president is going to say today is we need to end that model. And we need to have a housing financing system going forward that first makes sure private capital sits at the center of our housing financing system and second we can’t put taxpayers on the hook in the way we did before,” Housing Secretary Shaun Donovan told ABC News.
Obama wants the government to play a more limited and targeted role in supporting the mortgage market, according to an administration official, one in which private capital must be wiped out before the federal government provides any “catastrophic guarantee.”
The president is also expected to renew his call for Congress to make it easier for homeowners to refinance at lower rates and highlight his plan to make housing more affordable for the middle class.
“We have to make sure we have affordable housing across this country. You know one of the things that got us into this crisis is that we sort of had a policy that said everyone has to be a homeowner. And the truth is some families want to rent their housing. Some people can’t afford to be homeowners. So we need to make sure we have a balanced housing policy in this country,” Donovan said.
Today’s speech, the fifth stop on the president’s middle class jobs tour, is intended to bookend the speech he gave in Phoenix in 2009, shortly after he took office. Four years later, the community has rebounded from a time in which half of all homeowners were “underwater” and owned more on their mortgage than their home was worth.