With trillions in equity, you might say the housing industry's too big to fail
Anxiety over home affordability has been heightened in an age of soaring mortgage rates fueled by inflation. Yet for lower-income homebuyers, such worries aren’t new, long pre-dating current turns of the market.
Enter Freddie Mac, formerly the Federal Home Loan Mortgage Corp. The government-sponsored enterprise (GSE) was created in 1970 as part of the Emergency Home Finance Act to expand the secondary mortgage market in the US. Given the ongoing erosion in affordability, Freddie Mac has regained the spotlight as an alternative path to homeownership.
Nora Guerra (pictured), affordable lending senior manager at the GSE, provided a reintroduction of sorts during a recent gathering of industry professionals for the IMBF – International Mortgage Brokers Federation - hosted by the National Association of Mortgage Brokers (NAMB).
Reintroducing Freddie Mac to an international audience
While the GSE – along with its cousin, Fannie Mae – are well known in the US, many among the international assemblage of attendees at NAMB National 2023 in Las Vegas Sept. 8-11 learned of the agency in greater detail. NAMB hosted the IMBF at the recent gathering, where professionals from Australia, Canada, Ireland and the United Kingdom joined their US counterparts.
“We have been the cornerstone in the US for the housing market, making homeownership accessible to so many countless families across the US,” Guerra said. “Our mission to provide stability, liquidity and affordability has shaped communities across the nation. Our dedication to creating a sustainable home financing system is steadfast. And partnering with professionals like yourselves is vital to our success.”
In a room filled with foreigners unfamiliar with GSEs, that willingness to partner up with the public sector registered surprise among some guests, Guerra suggested. “Earlier, I was introducing myself to a couple of you and someone said, ‘it’s fascinating that you listen to real estate professionals’.”
Guerra was palpably enthusiastic in conveying the Freddie Mac message, yet she ticked off market improvements that would ensure greater affordability in housing. “We need to lower our more consistent mortgage interest rates nationwide,” she said. “We need longer terms, such as the 30-year fixed rate. This was such a culmination of our financial industry bringing that 30-year term versus the 15- and 20-year terms that our prior generations had.”
She outlined further steps that would more greatly ensure stability: “We try to have stability within consistent standards and requirements in the housing market,” she said. “No penalty for single-family refis. We absolutely want homeowners to take advantage of lower interest rates without penalties - access to credit for market segments that might otherwise be underserved or neglected.”
In her role, Guerra used data analytics to help lenders find opportunities that will advance homeownership for minority communities, according to a bio found on the GSEs website. “I really like to take a deep dive and work closely with our data analytics team to better relay the message of homeownership,” she outlined on the website. “And I think it’s important that I educate myself on everything that we do at Freddie Mac so that our housing industry professionals can help communities of color.”
Toward that end, Guerra participates in the Hispanic Organization for Leadership and Achievement (HOLA) business resource group’s Employee Development Program, which supports member development through coaching and mentoring opportunities.
Another mortgage meltdown?
For all her enthusiasm for her employers, Guerra didn’t shy away from acknowledging the GSE’s conservatorship that began during the Great Recession extending into its 15th year in 2023. As explained by the Federal Housing Finance Agency – which regulates Freddie Mac, Fannie Mae and 11 other Federal Home Loan Banks – the body placed both enterprises into conservatorship as a result of a mortgage meltdown that severely damaged the GSEs’ financial condition, leaving both unable to fulfill their missions without government intervention.
Having provided full disclosure on that unenviable status, she disabused the notion that there could be another subprime mortgage implosion in the future. “There’s a lot of really great information on why we’re not going to have another mortgage crash.
“Every time I present, people on social media tell me ‘I’m hearing a lot of real estate professionals saying we’re going to have another crash.’ I tend to say ‘no’. We have something quite the opposite of the mortgage crisis – we actually have about $30 trillion worth of equity in the US. That’s a historic number. What’s happening now is we have historic levels of housing appreciation, and with housing appreciation comes wealth.”
The upshot: “There’s so much wealth in our housing industry compared to the $12.3 trillion in unpaid mortgages. That’s quite the flip-side story to the 2009 mortgage crisis.”
Want to make your inbox flourish with mortgage-focused news content? Get exclusive interviews, breaking news, industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
