Fannie Mae chief executive officer Daniel Mudd said in a speech this week that his company is back on track when it comes to its ability to file timely reports with government regulators. And in terms of the housing market, he said while it remains positive on many fronts, he expects the industry is “not in a steady environment” and there are still many knowns and unknowns to be aware of.
His concerns include weakening home prices, which help determine credit, as well as credit losses that are expected to hit areas like the Upper Midwest, Florida and California considerably, according to Mudd’s speech.
Despite some of the gloom, Mudd speckled his report with several positive points.
“Accordingly, I think it is prudent to brace for the challenge, while remembering that fundamentally, and in the long term, the U.S. home finance is a strong, growing, profitable sector,” Mudd added. “We don’t know what the effect of government and regulatory action will be. The proposed stimulus plan, particulary the focus on FHA and the GSE loan limit, plus the HOPE NOW initiative, and the rate cuts—I think directionally are positive.”

Mudd also believes the Fed’s decision to cut the federal funds rate 75 basis points was ultimately a good decision for homebuyers and for homeowners who are looking for lower monthly payments. He said other encouraging changes include President George W. Bush’s economic stimulus package—which may include a temporary increase in the GSEs’ loan limits—and the natural outcome of heightening housing inventory, which will be a market that ends up automatically stabilizing its own supply of homes.
“The fact is, the long-term fundamentals of housing look strong,” Mudd said “Over the next ten years, according to the Census and other projections, the U.S. population is expected to grow by more than 26 million people, largely thanks to immigration and the good old act of people having kids. And our growing population will create 15 million new households that will demand two million new homes built every year. That, to me, indicates that when the correction turns to recovery, housing will regain its secure footing and once again become the healthy—and I emphasize, healthy—driver of the economy it has been most of our lives.”
Click here to read the full speech.