On GSEs and HARP 3
On Aug. 7, President Barack Obama and Zillow CEO Spencer Rascoff sat down for a discussion on housing. Questions were taken from the thousands that were submitted via social media from all across the country. (Click here to watch the video.)
During the discussion, two subjects came up often in both the questions and the president’s answers: GSEs and HARP 3.
Sometimes we in the the real estate industry tend to speak in acronyms and cryptic terms that many people don’t understand — not because they aren’t intelligent, but simply because they haven’t been exposed to these terms.
What’s a GSE? And why should I care?
GSE stands for “government-sponsored enterprise.”
Well that’s helpful.
According to Wikipedia:
A government-sponsored enterprise (GSE) is a financial services corporation created by the United States Congress. Their intended function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent, and to reduce the risk to investors and other suppliers of capital.”
Think Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation). There are other GSEs, but Fannie and Freddie are the most widely known and most relevant to home buyers, sellers and real estate professionals.
Why are GSEs in the news? Fannie and Freddie were both publicly traded companies until September 2008, when during the “subprime mortgage crisis” the federal government placed them into conservatorship. Essentially, the government took over Fannie and Freddie. Volumes have been written about this event. You’re hearing more about the GSEs now that the government is considering two legislative proposals, one in the House and one in the Senate, that call for the agencies’ operations to be wound down, their charters revoked and have their remaining assets sold off. There will be much debate over the pros and cons of this in the coming weeks.
HARP 3.0? The sequel to HARP 2?
Yes, that’s pretty much it — HARP 3.0 is the next iteration of the Home Affordable Refinance Program. Well, it’s being considered for the next iteration; right now, there is no HARP 3.0. There is of course much rumor and speculation as to what HARP 3 will look like, hence its current newsworthiness.
Depending on who you listen to, and what you want to see in a revamped HARP, there is talk of things such as:
- Extending eligibility dates.
- Allowing homeowners with mortgages that are not backed by Fannie or Freddie to be eligible for refi under HARP.
- Allowing those who previously refinanced under HARP to refinance again at a lower rate — a re-refi under HARP, so to speak.
Both GSEs and HARP 3 are likely to be in the news for weeks to come. Real estate pros: Your clients will be hearing about these, and they’ll have questions and need help interpreting the real estate speak. Stay abreast of these issues and be that valued source of knowledge your clients seek!