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» VISIT US ONLINE @ DSNEWS.COM 47 MILLER: RECAPITALIZED FANNIE, FREDDIE A (BAD) 20-YEAR OPTION If you're hoping to see the beleaguered Fan- nie Mae and Freddie Mac adequately recapital- ized, you're going to have to wait another two decades or so. But Mary Miller, the Department of the Treasury's undersecretary for domestic finance, is hoping to find another way. As she put it at the recent National Hous- ing Conference Annual Policy Symposium in Washington, D.C., the current system of taxpayer-funded GSEs simply doesn't work. Miller painted a rather grim picture of the GSEs, saying the entities have shut out far too many otherwise-credit-worthy borrowers by making lenders reluctant to lend and by putting the risk squarely on taxpayers' shoulders. Miller's portrait of the American housing market design shows a badly flawed system in which the aver- age taxpayer will get the bill if the market were to crash again. is, she said, would happen despite the federal government's significant presence in the housing market, which includes ongoing funding of the GSEs. But any perceived health in the current system is a false security, Miller said. e profitability of the GSEs in the past two years has, after all, "been driven by income from their retained portfolios, which benefit from being funded through Treasury capital ... at low rates the private market cannot obtain," she said. ese portfolios remain significant sources of income for entities such as Fannie and Freddie. However, the GSEs are required to shrink their portfolios by 15 percent per year, meaning that the GSEs will not be able to replicate the levels of revenue they've achieved theoughout the past two years. "In short, adequately recapitalizing the GSEs would take longer than many realize or would admit," she said. To make "a fairer and more sustainable housing finance system" will take a lot more than simply refilling the coffers of Fannie and Freddie—which, she said, would take at least 20 years to do. In the meantime, unless the design of the system is changed, there is little more to go on than crossed fingers that nothing goes wrong until the 2030s. e cornerstone of this new design should begin with a return of private capital to the cen- ter of the system, Miller said. President Barack Obama has embraced this same idea since his first term, saying that the GSEs' current model simply allows private shareholders and executives to benefit at the expense of taxpayer losses. e new housing finance system must also provide borrowers widespread access to safe, responsible products, including 30-year fixed-rate mort- gages, she said. Whatever happens will take a lot of work and a lot of patience. "ere is no quick-fix solution around this," Miller said. "Only legislation can protect taxpayers by responsibly winding down the GSEs and replacing them with a system where a government guarantee is transparent and explicitly priced." HOME WARRANTIES HELP HOMES SELL FASTER, HIGHER PRICES A study released by the Service Contract Industry Council (SCIC) has found that homes covered by a protection plan sell faster and for more money than those without one. According to SCIC's most recent look at home sale prices nationally, homes sold with a protection plan spend, on average, 11 fewer days on the market. SCIC's findings also show that homes on average sold for about $2,300 more when cov- ered by a plan. e ability to transfer a home warranty to new owners also helps create added incentives for buyers, according to Tim Meenan, the council's executive director. "Because home warranties can be trans- ferred to the new owner, buyers are finding that the extra protection of a service contract can ease this apprehension," Meenan said. "Homebuyers understand that when it's time to sell in the future, the home will have an increased resale value." With housing sales increasing amid the economic rebounds, home warranties make sense to help increase the home's marketabil- ity, Meenan said. National housing markets are indeed showing signs of strength and stability. And while there's been much talk of shrinking inventory in some markets (particularly in markets like coastal California or Hous- ton, where competition for homes among rapid population growth is fueling a seller's market), the most recent National Housing Trend Report released by Realtor.com found that inventory and price continued to rise for the month of April. is suggests a more robust national housing market in which the "dramatic shortages" of 2013 are being replaced by moderate home price gains and increasing inventories. Whatever the case, warranties give sellers a competitive edge, Meenan said. ey also give buyers the peace of mind that the every- day breakdowns on smaller electrical appli- ances, such as refrigerators or microwaves, that come from defects or everyday wear and tear will be covered. ese contracts help homeowners avoid unexpected, potentially large repair and service bills to things like ductwork, plumbing, or the HVAC system.

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