The Washington-based agency said that “significant uncertainty and vulnerability” remain in the U.S. mortgage market, which will require government backing for securitized mortgages. It also called for the U.S. to press ahead with plans to phase out Fannie Mae and Freddie Mac, the government-backed mortgage companies that have been in conservatorship since 2008.
“The challenge will be to strike the right balance between delivering an appropriate level of government participation and discouraging another cycle of overinvestment,” the IMF said today in its Global Financial Stability Report. The fund welcomed the Obama administration’s housing-finance plan and said improvements in the U.S. housing finance system would bolster global stability.
The U.S. didn’t tackle tax deductions for mortgage interest in its housing plan, which the IMF said was a mistake. The deduction should be lowered or at least capped, IMF staff recommended in a press conference today.
“We would like to see it reduced,” said Laura Kodres, chief of the IMF’s global stability analysis division. She said any changes would need to be phased in gradually to avoid penalizing homeowners unfairly.
http://www.businessweek.com/news/2011-04-06/imf-urges-u-s-to-be-explicit-on-housing-finance-guarantee.html