Obama says time for Fannie Mae, Freddie Mac shakeup

President Barack Obama. AP PHOTO/EVAN VUCCI

PHOENIX – US President Barack Obama called Tuesday for new efforts to support homeowners but he urged the closing of government-backed mortgage finance companies to limit the risk to public money.

Five years after the burst of the subprime housing bubble wreaked havoc on the world economy, Obama made his pitch for reform on a visit to Arizona, one of the worst-hit areas.

Obama hailed a recovery in the housing market – including in Arizona’s sprawling capital Phoenix – with home sales again rising and foreclosures slowing down.

“Millions of families have been able to come up for air. They’re no longer underwater on their mortgages,” Obama said.

But even though the worst US economic crisis since the Great Depression has eased, Obama said the United States had to do more to ensure its citizens can buy homes.

“We’ve got to turn the page on this kind of bubble-and-bust mentality that helped to create this mess in the first place,” he said.

“We’ve got to build a housing system that is durable and fair and rewards responsibility for generations to come.”

Specifically, Obama called for the United States to “wind down” Fannie Mae and Freddie Mac, the mortgage finance giants that the government had supported for years and then finally bailed out in 2008 during the crisis.

“For too long, these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” Obama said.

“It was ‘heads we win, tails, you lose.’ And it was wrong,” he said.

But, while embracing the role of the private sector, Obama called for a continued guarantee of a fixed rate mortgage over 30 years.

“That’s something families should be able to rely on when they’re making the most important purchase of their lives,” he said.

The rival Republican Party, which controls the House of Representatives, also supports ending Fannie Mae and Freddie Mac but has called for a greater market role in determining mortgage rates.

Obama called for other actions from Congress to boost the housing market, including authorizing funds to repair rundown homes and tear down vacant properties.

Obama also made a new pitch for reform to the US immigration system, crediting the arrival of new Americans to the growth of the housing sector.

Immigration is a volatile issue in Arizona, where Republican state lawmakers in 2010 pushed through a law to force foreigners to carry documents.

However, a number of prominent Republicans have blamed the party’s hard line on immigration for electoral losses with nearly three-quarters of Hispanic voters choosing Obama last year.