By Jon Prior
Moscow officials hoping to boost the Russian housing market have been visiting the United States for more than a year to learn how the American mortgage machine works.
That would be the machine that blew a gasket in 2007, causing a housing market crash that led to a financial crisis that then spurred on the deepest recession since the Great Depression. It’s also the machine U.S. lawmakers are working to replace with a new system.
But Russia is one of several countries hoping to export parts of the U.S. mortgage market back home as it remains a tantalizing model for foreign officials who want to make the dream of homeownership more widely available. Emissaries from Japan, Thailand and South Korea have also been studying how the U.S. housing market finds the money for so many loans.
“The system that we set up has worked very well generally over the years,” said Kerry Vandell, dean’s professor of finance at the University of California, Irvine. “The caveat is that it can be abused under certain conditions.”
Despite the recent volatility of the American housing market, foreign officials want to emulate how the U.S. system makes 30-year mortgages available from a variety of lenders and in all corners of the country. In their countries, loans are harder to come by or have terms that can saddle heirs with debt – and they lack a system for attracting the number of investors needed to fund new loans.
Much of the interaction between foreign officials and the United States has centered on Ginnie Mae, a housing agency that backs securities made up of loans insured by the Federal Housing Administration that are bought by investors – a process that helps banks get funding for more loans. Their role in the housing market is similar, but typically smaller, than the one played by Fannie Mae and Freddie Mac, which were bailed out by taxpayers in 2008.
For instance, Ginnie Mae President Ted Tozer has held a handful of meetings with officials from the Agency for Housing Mortgage Lending – Russia’s version of Fannie and Freddie – since 2012.
“Nobody has a finance system close to what we have,” Tozer said.
Read more at Politico.