Bad Fannie! Bad Freddie! Bad! Bad!

Real Estate Agent with Paragon Real Estate Group

Bad Fannie! Bad Freddie! Bad! Bad! You got yourselves into a major pickle with all the bad loans you made and we had to pay a lot of money to get you out of your jam. Your punishment? The slow annihilation of your existence. . .

At least that's what the New York Times reports today. In an article published this morning, they reported (or reminded me) that Obama AND the Republicans want to see Fannie and Freddie's lovely 30-year fixed rate loans end as we know it. 

That's because these fixed mortgages offered by Fannie and Freddie are backed by the Federal Government. Then this duo made some bad decisions during the real estate run-up and offered loans to buyers who couldn't pay them. We then took the hit on making the investors on these loans whole and forked over the funds for the financial bailout.  

I have trouble picturing life without the 30-year fixed, but I also never dreamed the lending climate would look the way it is today. Experts think the net result will be higher rates and points paid up front to 'lock-in' a rate. We also may see the length of loans shorten from 30 years to 20.

Whether this will end home ownership as we know it is hard to predict. Australian banks offer no fixed rate products, and the desire for home ownerhip there is just as high. Canada's real estate market has also sustained itself over the years, even though there's no mortgage interest tax deduction-- another on-again/off-again target of the current administration.  

So the thirst for home ownership may march on regardless of its higher cost. I guess the emotional appeal will always play a major factor, regardless of the cost and risks of ownership.  

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Dreaming of San Francisco? Cece Blase offers local Advice to San Francisco Buyers, Sellers and Owners-- and feeds the dreams of those who wish they could live in Tony Bennet's 'City by the Bay.' Call or email at 415-577-0809 or email at

Comments (6)

Ryan Frost
Compass Lending Solutions, LLC - Draper, UT

The only problem with the elimination of Fannie Freddie is, where will you get the backing from investors interested in buying mortgage backed securities? The answer: Wells Fargo, Citimortgage, Chase, and Bank of America. I distain big, corrupt, inept government, but I fear corrupt, inept big business.  

Mar 04, 2011 06:38 AM
Susan Neal
RE/MAX Gold, Fair Oaks - Fair Oaks, CA
Fair Oaks CA & Sacramento Area Real Estate Broker

Hi Cece - I think they are trying to figure out who will invest in these mortgages when Fannie and Freddie are gone.  If they find other investors to take their place, these people will want a higher rate of return, which will likely drive up interest rates for conventional mortgages. 

F&F will be phased out over at least 7 or 8 years while the others are phased in, so there will be no sudden death.  And presumably that will give interest rates a chance to rise slowly.  That's my opinion anyway.

Mar 04, 2011 06:40 AM
Keith Vermilyea
Boise Homes Realty brokered by Found It LLC - Boise, ID

I agree with Susan and hope that the phase out process will be engineered well as to mitigate the shock factor.  What a lesson we learned from this bad marriage between F & F and the taxpayer...

Mar 04, 2011 07:16 AM
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

I think the desire for home ownership is always going to trump the details of how you are going to pay for that home.  I have faith.

Mar 04, 2011 07:41 AM
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

Cece, the emotional factor will always be there to drive the housing market.  Let's hope it doesn't become a totally non-reachable goal for the masses.

Mar 04, 2011 08:33 AM
Doug Anderson
Tucker Associates Real Estate Services - Danville, CA
Bay Area Real Estate Views

We are certainly in uncharted waters Cece. While Fannie & Freddie will go away private capital will have to step in. Liquidity becomes a big factor and one thing that we do not hear much about is that banks will have to hold the risk of a certain piece of the transaction which will hamper additional liquidity to lend.

Mar 04, 2011 04:38 PM