Bill Would Allow State Of North Dakota To Get Into The Wholesale Mortgage Business


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.

Rob Port is the editor of In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters.

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  • Dustin Gawrylow

    Apparently the Senate IBL thinks North Dakota missed out on that whole “sub-prime mortgage disaster” and wants to recreate it here in North Dakota. Which party has a 75% majority again?

    • Rob

      Some of this stuff just makes you shake your head in wonder.

  • Hal Neff

    No, No, No! The B of ND should stay out of the housing mortgage and loan business. Fannie Mae and Freddie Mac and FHA has messed that business to the point it is beyond hope.
    If the State of ND wants to help the housing market in the form of subsidies that do not carry long term liabilities they may look at this possibility: subsidize the communities, towns, cities in some relief—short term— of the property taxes and improvements. Do not get into the holding or guarantee of mortgages or loans of single or multiple residence homes.
    If the legislators or Governor are willing to put their personal money into home mortgages they are welcome to do so.

    • Rob

      I don’t see how it’s needed. We’ve got a very, very hot housing market in the state.

  • matthew_bosch

    But why?

    • Rob

      That’s a good question. What problem are we solving? What does this even address?

  • Waski_the_Squirrel

    I’m not sure why this is needed in North Dakota. The real estate market here is fine. Here in the west, even the ridiculously expensive houses are selling quickly. In the small towns in non-oil parts of the state, houses are not selling, but that is due to demographics, not money.

    • Rob

      I think it’d just a big government mentality. They think they need their fibers in everything.

  • SusanBeehler

    Why?!!! I don’t like the power the NDHFA they are exempt from open meeting and records law because the only ones who have privy to their doings is the Industrial Commission. There is no checks and balances to safe guard the taxpayers money NOW! This will open the door for more “special” tax credits which currently allow certain investors to profit off of our “low” income housing needs and no one but the Industrial Commission can inquire into their dealings. So if an application for federal tax credits is not followed or fraud is committed a handful of people can look the other way.

  • camsaure

    NO!, the govt should not be involved in competition with the private sector. It worked so well in Grand Forks after the flood (sarc). They wound up with a bunch of substandard houses built by “fly by night” outside the state concerns. Probably one of the reasons former mayor Owens fled the state before all the chickens came home to roost.