2016 Postmortem
Related: About this forumDon't Kill Fannie Mae
By JOE NOCERA
Published: August 12, 2013 18 Comments
Could it get any worse for Fannie Mae and Freddie Mac? Last week, even President Obama joined the growing chorus of those who want to put them out of business.
He did so in a speech in Phoenix, outlining at long last his ideas for reshaping the countrys housing finance system. He called for the housing finance market to be primarily driven by private capital, with a limited federal role. He said that the 30-year fixed-rate mortgage should remain a mainstay of the mortgage market. And he essentially endorsed a recent bipartisan Senate bill a complex piece of legislation that calls for winding down Fannie and Freddie over five years.
Lets just call this what it is: capitulation. Every since the financial crisis, Republicans have insisted that Fannie and Freddie private companies that also have a government role, and that guarantee and securitize mortgages were the root problem. According to their theory, the two companies drove the country off the subprime cliff, primarily because of their federal mandate to help make it possible for low-income borrowers to own homes.
The truth is pretty much the opposite. When the banks first jumped into subprime mortgages, Fannie and Freddie hung back. Only after they began losing significant market share did Fannie and Freddie decide, belatedly, to get into the game. Because they were so thinly capitalized, they had almost no cushion when the losses began to pile up.
more...
http://www.nytimes.com/2013/08/13/opinion/nocera-dont-kill-fannie-mae.html?_r=0
djean111
(14,255 posts)The people who are really in charge of this country are privatizing everything. No resistance in Washington, only enabling.
Socal31
(2,484 posts)I work with Fannie/Freddie every day, and they are no enemy. The enemy that caused the bubble was "private" money, and that is what eliminating Fannie and Freddie is calling for.
FHA is intentionally becoming extremely expensive in order to reduce its market-share. Not everyone qualifies for a VA or USDA loan. That leaves a vast underserved market.
(I am an underwriter and work with all the above mentioned entities, as well as some private money)
Samantha
(9,314 posts)in 5 years, if they are both phased out?
Sam
Socal31
(2,484 posts)Fannie and Freddie are just "behind-the-scenes" players, which along with the actual servicer of the loan (Wells, Chase, BofA, Flagstar, whoever) should be almost invisible to you as long as you make the payments as agreed.
The only time it matters if your loan is with Fannie/Freddie is if you current one was originated prior to June, 2009...then you can refinance it even if your equity is negative. (HARP, HARP 2.0)
Private money is making its way back into the market slowly, and the rates are 1-2% higher than the current Best Execution rate for a Fannie Mae loan. If nobody is going to help the investor/servicer eat a % of the loss if you default, they will balance this risk by charging higher rates.
Artificially low inventory is causing a nationwide housing cost increase, and rates are on the rise. It is a perfect storm for further shutting out the young and the lower-middle class from home ownership.
Samantha
(9,314 posts)so if I did not want to refinance, are you saying I have no choice? Fannie/Freddie will totally cease to exist?
Sam
Socal31
(2,484 posts)You shouldn't notice anything different.
On a side note, if you have had your current loan for 15 years, and it started as a 30 year...you would be crazy not to refinance into a 15yr fixed based off today's rates....as you would be donating free $$$ to your bank
DirkGently
(12,151 posts)on the private market to "expand the market." What they mean is more shady investment instruments, more gambling.
More of EXACTLY what caused the crash.
Unbelievable.
davidpdx
(22,000 posts)Xolodno
(6,401 posts)...as higher interest rates will make it less affordable to buy a house. Thus something is gonna have to give.