The usual political wrangling has accompanied the Treasury Department’s white paper on Fannie Mae and Freddie Mac. But this is yet another issue happening in a vacuum, divorced from actual circumstances. If you want to talk about reform of the secondary mortgage market, fine. But it’s almost impossible to do so without recognizing the total breakdown in that market and what that has done to housing as a whole.
I submit a few things for the record. First, you have foreclosure mills filing fraudulent documents to cover for the fact that they lost or otherwise bungled mortgage assignments for millions of loans when they securitized them over the past decade. These are the same private actors who would be responsible for the entire securitization market under a plan that phases out Fannie and Freddie.
The broken securitization market is the original driver in this persistent fraud from foreclosure mills and servicers. And the mechanism used by the private market to facilitate their securitizations, namely MERS, was not legal in any way. Yet they continued to use it in violation of state property law.