UNITED HOME MORTGAGE CENTER/ FANNIE MAE-FREDDIE MAC NEED MORE COMPETITION...FAST!! Nicky Chambles

Fannie Mae’s and Freddie Mac’s influence over the mortgage market is one of many reasons we should be happy when private competition returns. At this point, Fannie and Freddie are nickel-and-diming us to death to cover their mismanagement. Worse, they are strangling segments of the market that shouldn’t be strangled, such as the market for Alt-A loans. Yes, Alt-A and subprime loans have caused a lot of heartache over the past two years, but it wasn’t the loans, per say, that caused the heartache: It was the pricing of the loans. Lenders and investors were insufficiently compensated for risk, but that doesn’t mean that borrowers with lower credit ratings or borrowers with irregular incomes should be eliminated from the mortgage market. On the contrary, they should be part of the market. The key is to have these borrowers pay rates and fees according to the risk they impose. In other words, it’s not the product but the way the product is applied. Fortunately, private competition for Fannie and Freddie will return, bringing more liquidity and options. It can’t return soon enough.