John Sununu, a Republican candidate for the U.S. Senate in New Hampshire, is advocating for the privatization of the government-backed mortgage entities, Fannie Mae and Freddie Mac. These organizations play a vital role in maintaining the accessibility of home loans for working families.
New Hampshire currently grapples with a housing affordability challenge, partially due to a deficit of approximately 23,500 housing units. This shortage has led to increased demand and rising costs in the housing market.
Fannie Mae and Freddie Mac operate by purchasing mortgages from local banks and lenders, thereby providing these institutions with the necessary capital to issue further loans. The mortgages are then bundled into securities and sold to investors, with guarantees on payments provided by these entities. This mechanism enables smaller lenders to compete effectively in the housing market.
Smaller lenders often provide more adaptable solutions for borrowers with unique financial situations, making them particularly beneficial for first-time homebuyers or those with limited resources.
Sununu, who served as a U.S. Senator from 2003 to 2009, expressed his views in a 2011 Boston Globe editorial, advocating for a transition to a fully privatized system. He suggested that large banks could easily provide the liquidity currently offered by the government-sponsored enterprises.
“Forty years ago, the two government-sponsored enterprises offered local lenders the only alternative to holding mortgages on their own books,” Sununu stated. “But today, that liquidity can be provided by at least a dozen large banks that securitize home mortgages, commercial loans, and other assets.”
Sununu also argued that the plethora of existing government housing programs negates the need for Fannie Mae and Freddie Mac to make mortgages more accessible.
The consumer rights nonprofit, Americans for Financial Reform, warns that this shift towards privatization could lead to a more profit-driven lending industry, potentially excluding many working-class buyers from the housing market.
Without government backing, the securities associated with Fannie Mae and Freddie Mac could become riskier investments, prompting investors to demand higher returns and thereby increasing mortgage payments.
Sununu’s campaign has received substantial donations from executives who might benefit from privatization. Notably, his campaign reported contributions of $48,000 from executives at Blackstone, a major commercial landlord, and $17,000 from billionaire hedge fund manager John Paulson, who has significant investments in real estate.
Both Paulson and Blackstone supported a 2017 initiative to privatize these mortgage giants. NPR reported that such a move could be financially advantageous for Paulson.
Sununu is set to compete against former Massachusetts Sen. Scott Brown in the Republican primary on September 8, with the victor likely contesting against Democratic Rep. Chris Pappas in the general election in November.
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