Capitalizing Fannie and Freddie

Fannie Mae and Freddie Mac have more than repaid the $188b they received in federal bailout monies in just 6 years.  Why are they still remitting 100% of their profits to the Treasury every quarter, prohibiting them from increasing their capital and net worth to offset potential losses due to future market fluctuations?

The Treasury needs to modify the 2008 agreement and allow Fannie and Freddie to re-capitalize.  In 2014 the combined profits of the two GSE’s will near $25b.  Once re-capitalized a case can be made to lower the higher fees being charged to consumers and make the GSE mortgage offerings less costly to taxpayers.

We need to insist that our government keep these agencies intact and allow them to refinance themselves, out of current profits, and continue to provide this most valuable government service to U.S. homebuyers, as they have for over 60 years.  The GSE’s, established in the 30’s to stimulate affordable home ownership, were a great idea then and still are today.

Remember...the $188b that was re-paid to the U.S. Treasury did not come from “all” taxpayers, as the politicians would have you believe.  Every penny has been re-paid by just those taxpayers who took out a mortgage, and paid higher loan fees, since 2008, which was a very small percentage of “all” U.S. taxpayers.

Good News For FHA

The Federal Housing Administration went from having a net worth of -$1.1 Billion to a current net worth of +$4.8 Billion.  That is a 500% improvement since the 2008-09 mortgage melt down.  The improvement has been gained on the backs of those who obtained FHA mortgages since 2008.  So, only those American taxpayers, who obtained a mortgage in the last 6 years, have paid the price to recapitalize FHA, not every American taxpayer as the politicians would have you think.

These relatively few American taxpayers paid for recapitalization with increased annual mortgage insurance premiums, which have risen to a whopping 1.35% of the mortgage, balance per year.  Now that FHA is recapitalized, there are a few in congress who are suggesting that the annual insurance premium be lowered in an effort to stimulate borrowing and home purchases.