In recent months, just about everyone involved in the housing industry has met with lawmakers to discuss the Fannie and Freddie makeover mandated by the same law that bailed them out to the tune of 134 BILLION of taxpayer money.
The government has helped would-be homebuyers by guaranteeing mortgages for a long time, since the 1930s. But many Republicans blame Fannie Mae and Freddie Mac for the housing bubble and subsequent POP that took the US economy with it. The two government controlled mortgage giants guarantee loans for private investors. Some new members of Congress - especially Tea Partiers- see a clear mandate from the voters who have put them in office for less government intervention in the economy and for letting private capital do its work. Representative Hensarling of Texas, fourth-ranking Republican in the House, recently said he would introduce legislation to transfer Fannie and Freddie's role entirely to the private sector within five years.
On the other side is the housing industry which worries that without government guarantees, mortgages will not be available for many Americans. Investors and the industry argue that without government guarantee, mortgages will become much more expensive or simply unavailable whenever investors decide to back off mortgages as an investment.
One possible solution proposed is an FDIC type insurance program that the mortgage industry would fund in exchange for government support. But some say that any government guarantees eliminate an essential element of market environment: investors' risk analysis. They worry that any government guarantee would lead us back to a repeat of the recent scenario of deteriorating underwriting standards for mortgages and eventually, yet another bailout.
As a real estate agent with a decent background in economics, I am in a good position to see both sides. There simply is no easy fix. Those with good credit and a solid down payment will get mortgages. It is the young, the less affluent -often minorities - who will have difficulty getting mortgages. Owning your own home is an important part of the American Dream and we should not let that dream disappear, yet there is no getting around the fact that those whose credit is less solid and who have less money to put down as a down payment represent a higher-risk group. I suspect the solution is going to be a blend of higher rates for some mortgages and some level of continuing government guarantee for higher risk mortgages.
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