Is Dumping Fannie and Freddie a Smart Idea?

First, I have to agree with Lynn, #34 who sums it best. Secondly, all GSE's should be eliminated. The feds shouldn't be in business with anybody. Read the Constitution, article I, section 9. Third, our nation prospers because of FREE enterprise.

Entrepreneurs have and will continue to create products and services for the market and as inflation will certainly increase, we'll probably see mortgage terms stretching up to 50 years or more. It's inevitable and our nation's history confirms my forecast. 

Fannie/Freddie are a cash cow for the government at the moment. There appears to be a lessening in the need to get rid of them. What would replace them? 

No wonder they are solvent. With the loan level price adjustments applied to even the best borrowers these days, that's a lot of money!

And, if they are gone what about the 10 basis points that was added last year to home owner financing to pay for the tax  holiday?

I think Fannie and Freddie are back doing what they do best buying up mortgages to keep lenders liquid.  The problems with Fannie and Freddie are two-fold.  1. They are "too big to fail."  They need to be broken up into smaller entities to avert another bailout down the road.  2. They need to be only buying A-rated paper.  All these B, C, D credit borrowers need to be kept in a lender's portfolio or be done by a hard money lender instead.

Hi William, we agree.  Although Fannie & Freddie got out of hand during the financial crises we still need them as a secondary mortgage market.

The real goal is turn us all into a nation of renters with the government owning all the houses, or the banks owning them and they are run by the government.

William, thanks for your blog and the link to Ken Harney's.

The only ones to benifit from dismantling Fannie and Freddie are the big banks.  There is also pressure to get rid of FHA when all three are financially sound and earning profits.

It seems like we truly believe that it can stop people from buying and builders from building? It won't. If we do not screw the market, people will be buying and builders will be building, and there will be financing.The market will find the way to do business.

Governement is not the answer. Curious if agents would still insist after years of short sales that it was a good idea from the start, a better than let them go into foreclosure. By today, we would have been in much better shape without playing socialism.

The market would have rebound faster and be healthier

You make some excellent points, William. I hate seeing the government with it's fingers in everything but wonder if the other side of the coin would be worse.

The banks have shown that they cannot be trusted. The government cannot be trusted either but theoretically they have to answer to the voters

Consumers will certainly pay the price with these changes. Higher interest rates, shorter terms and fewer fixed rate mortgages may become standard.

William - I would have to agree with Myrl Jeffcoat. I also think there has to be a better solution or we'll be in trouble either way.

William, what?  Are you on vacation or something?  Time to write another post.  Miss you around here!

Good morning William,

Congrats on the well deserved featured post! Great question and I loved Myrl's summation: "Sometimes, trying to control a train running out of control on the track is a better alternative than allowing it to derail outright!"

We do indeed miss your blog posts and your fabulous photos here, William. Have a wonderful Labor Day!

William  Someone will have to buy paper.  What private investor will buy it when interest rates are very low.  When the Fed stops forcing low rates private investors will fill the void and we can let them RIP

Hi William,

Great post and congrats on the feature. I enjoyed reading all the comments and agreed with most. Dorie summed it up nicely and it sort of reminded me of the 2007 real estate crash. Perhaps if something had been done sooner, it wouldn't have collapsed and sooooo many foreclosures.

Looking for your current blogs. I hope you are enjoying an outstanding month with your camera in hand.

The exact place that we NEED intervention, they're trying to dismantle.  Go figure!  I agree with Ben, we'd either be a solely jumbo market or we would be 100% private banking - both of which would limit both our business and buyers' options. 

I am about to start blogging less as well. It is just getting too difficult to keep up.