Who do we listen to when it comes to predicting what’s-next for the housing markets?….well, this guy.

He would know. He is the CEO of Fannie Mae. Meet Michael Williams…

Source: Bloomberg.

The U.S. housing market still has a “long road ahead” to recovery and investors and borrowers should remain cautious as the economy regains its footing, Fannie Mae Chief Executive Officer Michael Williams said.

Williams, in his first public address since he took the helm of the government-controlled mortgage-finance company in April, said the market has had a “very, very tough year.”

“Anyone looking objectively at the economy and the housing market sees hope,” Williams said in prepared remarks being delivered today at the Exchequer Club in Washington. “The patient is out of intensive care, but still has a very long road ahead to a clean bill of health.”

The mortgage market is still dependent on government- affiliated programs, with private banks providing just 10 percent of loan liquidity, down from about 60 percent in 2006, Williams said. Fannie Mae and Freddie Mac are responsible for about 70 percent of all new mortgages, while the Federal Housing Administration accounts for about 20 percent, Williams said.

Foreclosures will continue to climb this year, Williams said, putting pressure on home prices as mortgage companies work through a backlog of property seizures that had been suspended earlier this year as part of efforts to provide struggling homeowners with relief. While homes are selling faster, the inventory of foreclosed properties and unsold homes remain at “exceptionally high levels,” he said.

“There is no precedent for what borrowers are going through today,” Williams said.

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Ineligible Borrowers

One in every 10 mortgage borrowers is behind on their payments and one in every 25 homes is in foreclosure, he said. Homeowners have lost 40 percent of their equity, making it difficult for many to refinance, he said.

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Some borrowers, as a result, are ineligible for government programs to refinance into lower rates. More than 1 million delinquent loans are ineligible for President Barack Obama’s loan modification program because the debt was used to finance second homes or exceeds the program’s loan limits of $729,750.

“And not every borrower is taking advantage of the program,” he said. Only 29 percent of the people who have received solicitation letters have responded, according to Williams. He said borrowers who aren’t participating are skeptical of the program, have only just learned about it, have lost their jobs or have already abandoned their homes.

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Fannie Mae’s Future

Regulators seized Fannie Mae and smaller rival Freddie Mac one year ago amid concern that their capital wasn’t sufficient to withstand a surge in mortgage delinquencies. The companies, surviving off a $400 billion lifeline from the U.S. Treasury Department, have since been thrust into a leading role in Obama’s homeowner rescue plans, which include offering low-cost mortgage refinancings and waiving some loan standards.

The companies, responsible for $5.2 trillion in U.S. residential mortgage debt, have booked a combined $165.3 billion in quarterly net losses in the past two years and have received or requested $95.6 billion in taxpayer aid since November.

Williams, when questioned after the speech, declined to discuss the future of Washington-based Fannie Mae, the potential status of shareholders or the company’s past consideration of a reverse stock split. The government owns 80 percent of Fannie Mae and Freddie Mac and has said it would consider options early next year for potentially restructuring the company.

“In dealing with the stock and the common shareholders, the administration will take that into the solution that ends up being developed in terms of what to do with the companies and the enterprises long term,” Williams told the audience after his speech. “I think that’s the time when that issue will be wrestled to the ground.”

Loan Resets

Williams also said that he is concerned about a second wave of resets for some adjustable-interest rate mortgages as well as rising delinquencies for loans on apartment buildings.

“We’ve seen challenges in terms of the rental capabilities of certain properties as well as the ability and fragility of lenders to sustain their investments,” Williams said after his speech.

Prices on homes financed by Fannie Mae and Freddie Mac were up last quarter, attributable to borrowers taking advantage of an $8,000 first-time homebuyer tax credit that expires in November and more affordable home values, Williams said.