A summit, to be sponsored by the U.S. Treasury Department, will discuss ways of repairing the nation's mortgage finance industry, a business that accounts for almost 15% of the nation's economy. According to analysts, the complexity and sheer size of the industry can cause major problems if not handled right.
Market experts have stated that an erroneous move by the federal government could result in credit restriction, home price declines, more foreclosures and a further slowdown in the nation's economy. Advocates of the housing industry and members of the mortgage industry have warned the federal government to tread carefully when dealing with issues related to mortgage loan financing. Some legislators, on the other hand, have called for an end to bailouts and guarantors that are government-controlled.
The National Association of Home Builders has weighed in on the issue, stating that investments in housing and services related to them account for almost 15% of the country's gross domestic product, hence the need for caution when dealing with mortgage business-related concerns. The sector ranks second only to health care in terms of gross domestic product role.
Analysts have also reminded the government and the industry that government-sponsored enterprises Freddie Mac and Fannie Mae are central to any attempt to fix problems in the mortgage finance sector. The two GSEs guaranteed and issued over 70% of bonds in 2009 that are mortgage supported. This adds further to the level of the federal government's involvement in the mortgage market, which is believed to have doubled since five years ago.
The Treasury-organized forum will also be hosted by the Department of Housing and Urban Development. Executive representatives from some of the largest lenders in the country, such as Bank of America Corp., Wells Fargo and Co. and Pacific Investment Management Co., will be attending the event. The meeting is expected to touch upon various issues related to the industry, including financial regulation.
The issue of regulating the mortgage finance industry has been a sore point between the two major political parties during House deliberations. The same issues are expected to be mentioned during the forum organized by the Treasury Department.
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