Gov Corazine Urges GSE To Buy State Housing Finance Authority Debt

The U.S. Administration needs to direct federal mortgage securers to buy debt from state housing authorities as part of the White House's national emergency housing plan, New Jersey Governor Jon Corazine said Sunday.

Some states programs and the promise a federal housing plan has begun to curb the growth of foreclosures, but Corazine said that the regulators needed to direct the government sponsored enterprises to buy debt as part of the policy salve for the ailing market.

"All of us together could encourage Fannie Mae and Freddie Mac - who are in the market buying mortgages - to also buy debt from the (state housing finance agencies)," Corazine told a meeting of the commerce committee at the National Governors Association Winter Meeting. Corazine's state has been one of the hardest hit by the housing crisis that has rocked the nation.

President Barack Obama mentioned the concept in a speech about his housing plan, but Corazine said it was unclear if the Administration would follow through with his specific request.

Housing finance agencies have traditionally been a major provider of resources for first time buyers, and if Fannie and Freddie were to buy debt, it would cut tax-exempt market rates, which are substantially higher than taxable market rates.

But Corazine said state programs, such as the new requirement in New Jersey that all foreclosures must be mediated before a judge, "have really stemmed the pace of growth of foreclosures," he told the panel of governors.

North Carolina's Gov. Bev Perdue said that programs in her state would mean that foreclosures would be down an estimated 50% by the end of the year.

Washington Governor Chris Gregoire said the state problems ultimately couldn't make a dent in the problem without the federal plan. "We desperately need this federal solution," she said.

-By Ian Talley, of Dow Jones Newswires, 202-862-9285; [e-mail]