Former Freddie Mac Chief Economist Says Housing Finance Model Can Be Found Outside The U.S.
Wednesday, May 15, 2013
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After the housing collapse of 2008 sent the economy into a downward spiral, the focus turned to housing finance reform.
The mortgage market is almost entirely backed by the government after the housing crisis led to the takeover of the two mortgage giants Fannie Mae and Freddie Mac in an attempt to stabilize the housing market. Meanwhile, lawmakers in Washington continue to debate how to reform housing finance.
Dr. Michael Lea, director of the Corky McMillin Center for Real Estate at SDSU's College of Business Administration was Freddie Mac's chief economist in the 1980s. He'll be heading to Washington next month to testify on housing finance and, more specifically, what to do about Fannie Mae and Freddie Mac. His research centers on how housing is financed in other countries.
Lea said, for instance, in Denmark, housing is financed through a bond market. Lenders issue a bond on behalf of the borrower and purchased directly through the investors.
Several sectors of the U.S. economy are improving since the economic downturn. Employment is up as are housing prices. But the sector that some say started the recession — the housing finance market — is still struggling. The private home lending market has not rebounded and the mortgage market is almost entirely backed by the government, which Lea says is not a good thing.
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