Opposing view: Freddie benefits housing
Mon Apr 28, 12:21 AM ET
By Richard F. Syron
Freddie Mac supports improved regulation of our company and of mortgage lending generally. But especially today, getting it right is critical.
Freddie Mac was created by Congress to provide liquidity, stability and affordability to the residential mortgage market. We are a shareholder-owned company using private capital — not taxpayer funds — to achieve our mission. And the model has worked. Freddie operates at the center of what is still, even with today’s market downturn, the finest housing finance system in the world.
We provide a stable and consistent source of funds for homeownership and rental housing. This is especially important today, when most other investors have left the mortgage market, and the portion of the market we serve is the only one continuing to function normally. By keeping our part of the market healthy, we are helping prevent the housing downturn from getting even worse.
But even during normal times, Freddie benefits our housing finance system.
Because we add liquidity to the market, mortgage rates on loans we buy are lower — usually ¼ to ½ a percentage point, and more than 1 ¼ points today. We also make America the only country in the world where 30-year fixed-rate mortgages are widely available.
Freddie is a unique institution, and it should be regulated as such. Some would have us regulated like a bank, especially with regard to capital, but we are a very different entity. We invest only in residential mortgages, and our capital levels need to be consistent with that.
It would be impossible for us to provide the same support to the housing market if capital levels are not tied appropriately to risk. We must simultaneously operate safely and soundly, fulfill our mission, and provide a reasonable and competitive return to the shareholders whose money makes our mission possible.
Regulation needs to strike the difficult balance among these objectives. This is a complex task that needs to be done carefully. Done wrong, it could do more harm than good.
Richard F. Syron is chairman and CEO of Freddie Mac.