Regardless of what you’ve heard, Fannie Mae and Freddie Mac aren’t going anywhere. The two GSE’s, vilified by an angry, albeit unknowledgeable press, as a major contributor to the mortgage credit collapse have weathered the storm. After years of inquiry and reflection, the prevailing “urban legend” that the two GSE’s were playing Russian roulette, with the nations mortgage credit has been proved false. The GSE’s, though flawed in some ways, were not culprits, but severely damaged when Countrywide and a few large investment bankers high jacked the mortgage industry.
Look for regulations to re-fund the agencies out of their current profits (which have been taken by the U. S. Treasury, each month, since the GSE’s were placed into receivership) and to create one mortgage backed security (MBS) to be used by both agencies, thus saving Freddie Mac close to $400m a year in Mortgage Adjustment Payments (MAP) that they are currently paying to subsidize the value of their MBS to match Fannie’s. The loans perform the same...no need for two different securities.
The American taxpayer has enjoyed access to low cost mortgage credit via very effective and stable GSE’s since the late 1930’s. Don’t throw the baby out with the bath water. Modify the business model, fix the operational disparities, regulate to eliminate potential transgressions and let’s got back to stimulating housing.
I am sick to death hearing about the multi-billion dollar bail out, how it cost American taxpayers so dearly and how Washington must make sure that it never happens again.
Fact: all the bailout monies advanced to the mortgage industry have been repaid, with interest, in just 6 years.
Fact: all American taxpayers did not pay for the bailout. It was paid for by those few, who chose to obtain a mortgage to purchase a home since 2008. Those taxpaying homebuyers paid back the TARP advance by paying increased fees and costs to various government agencies to obtain their mortgages.
Fact: the total advance of TARP funds to the mortgage industry was equal to the cost of one stealth bomber or one new navy cruiser. No uproar from Congress or the President, about the poor American taxpayer, when the military makes these regular expenditures.
Opinion: What better place for a government to return tax dollar benefits to its’ citizens than to be actively involved in contributing to the process of homeownership. Congress and the President scream like stuck pigs that the government should get out of housing. Why? A healthy housing market drives the domestic economy. When housing is strong, people are working. Goods and services are mined, harvested, manufactured, sold, purchased and used in the homebuilding process. Homes are designed, appraised, built, inspected, marketed, sold, financed, titles transferred, city utilities hooked up, streets paved, curb & gutter poured….gee…..so many citizens involved and so many citizens so positively affected by the process.
Why shouldn’t our government continue to have line item expenditures, in the national budget, to support something as beneficial, to so many of its’ citizens, as housing?
There is a new loan program in development that focuses on rapid equity growth, as opposed to low monthly payments for 30 years. The program being developed uses the funds that would normally have been been used for a 3% or 5% down payment, to instead be used to buy down the interest rate on a 15 year mortgage. In today's market, this strategy could get the rate down to 2%. The crafters of this mortgage suggest a 100% LTV program that relies on the buy down investment and rapid equity growth as major incentives to keep borrowers paying as agreed.
