North Dakota is unique among the states in having a state-run bank. Now, per a bill coming out of the Industry, Business and Labor Committee (at the request of the North Dakota Housing Finance Agency), the state wants to be a mortgage wholesaler too.
Here’s the language from the bill, which is SB2079:
The business and transactions of the housing finance agency in addition to other matters specified in this chapter may include anything that any corporation or limited liability company lawfully may do in conducting a wholesale servicing mortgage lending business, except as it is restricted by the provisions of this chapter. This provision may not be held in any way to limit or qualify either the powers of the industrial commission granted by or the functions of the housing finance agency as defined in this chapter. The powers of the industrial commission and the functions of the housing finance agency must be implemented through actions taken and policies adopted by the industrial commission. For purposes of this chapter, a wholesale servicing mortgage lender is a mortgage loan wholesaler that neither solicits mortgage applications nor deals directly with mortgage loan applicants, it purchases loans from mortgage originators, pools the loans, and then sells them to private or governmental investors while retaining the servicing rights.
Last legislative session saw SB2078 passed, which created a program allowing the Bank of North Dakota to originate mortgages. At the time of the passage, a legislator who voted against the bill told me it was the “state version of Fannie/Freddie,” but that wasn’t entirely accurate.
As bad as that bill was, this bill would create the state version of Fannie Mae/Freddie Mac, the infamous government sponsored entities that were used to keep the subprime housing bubble inflated by buying up loans. Keeping it inflated, that is, until it popped.
You really have to wonder why the State of North Dakota needs the authority to buy up mortgages. Is it to promote lending the private sector wouldn’t do otherwise? That has to be the answer, and if so, why should North Dakota taxpayers be on the hook for buying up mortgages so risky the private sector won’t put their own money on the line for them?
It seems this bill opens up the door to exactly the sort of miserable lending/housing policy that collapsed our economy at the national level. Giving the HFA the authority to do this doesn’t necessarily mean the state will start promoting subprime lending, but it doesn’t mean they won’t either.