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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