Paulson says Fannie and Freddie vital to financial system

Speaking at the New York Public Library, U.S. Treasury Secretary Henry Paulson said Fannie Mae and Freddie Mac are vital to the U.S. financial system, and that he remains confident Congress will pass GSE legislation sometime this week.

"Because of their size and scope, Fannie and Freddie stability is critical to financial market stability," said Paulson. "Their continued activity is central to the speed with which we emerge from this housing correction and remove the underlying uncertainty in our financial markets and financial institutions."

Looking ahead, new legislation would have to address the systemic risk associated with GSEs and the new regulator, which is expected to be established with the upcoming legislation, will have to pay extra attention to Fannie Mae and Freddie Mac.

In the Q&A that followed, Mortgage Daily News reported that Paulson reiterated the need for powers over the GSEs to be flexible, and that any loans made to Fannie or Freddie would be under terms decided by the U.S. government and the institutions. Paulson also repeated that any loans would be fully collateralized.

Paulson also said that while headline inflation in the United States is moving higher, core inflation, which is a better long-term indicator, was manageable. He also said that higher food and energy prices would prolong the recovery of the U.S. economy, adding that the value of the USD would eventually reflect the strong underlying fundamentals of the economy.

Wachovia exits wholesale mortgage lending business

Wachovia Corporation, the nation's fourth largest-bank, reported that it is leaving the wholesale mortgage lending business.  Beginning July 25th, the company will no longer offer mortgages through brokers, joining other lenders making similar moves to exit the troubled sector. 

The Associated Press reported more details are expected when the Charlotte, N.C.-based bank releases its second-quarter earnings later today, July 22nd.  Earlier this month, Wachovia hired Robert Steel, former U.S. Treasury Under Secretary and Goldman Sachs Group Inc. executive, as its new CEO.

Wachovia spokesman Don Vecchiarello said in a statement that the company "recognized some opportunities to re-position our business" given the current market conditions.  "We believe it is important to focus on serving the needs of customers who have relationships with the bank, and who are located in geographies where Wachovia franchises are located," Vecchiarello said.

Big banks, such as Bank of America and National City Corp., have stopped making loans through brokers entirely, relying instead on their loan officers. National City said it was forced to do so by a continuing downturn in loan demand, while Bank of America said it saw better "long-term opportunity" in working through its own loan officers.

Real estate market expected to improve with new president

Nearly half of all homebuyers (44 percent) believe the housing market will improve once the new President takes office in January, 2009, according to a new survey conducted by Harris Interactive and commissioned by Move, Inc.

Despite any reservations, the survey indicates underlying demand for homeownership is healthy. While nearly half (41 percent) of current homeowners do plan to purchase a home again, 80 percent of all renters plan to purchase a home someday with 47 percent planning to purchase a home within the next five years. More people who plan to move will do so for space-related (26 percent) and life-stage change reasons (17 percent), such as having children (2 percent) or downsizing to a smaller residence (9 percent), not financial ones including an increase in rent (2 percent) or an expensive mortgage (less than ½ percent).

Executive Appointments

Realty Executives International announced Gregory Traynor, will serve as owner and regional developer of its Ohio, Kentucky and West Virginia region.  Traynor has more than 21 years of experience in real estate settlement, finance and sales and will provide quality leadership to existing and new franchisees and sales associates.