Fannie and Freddy to be replaced by 2018. What next?
Hi all: I read that the Obama administration is proposing to replace Fannie Mae and Freddy Mac (the two largest mortgage guarantors) by 2018. Since a majority of loans are guaranteed by either Fannie or Freddy, it begs the question. What happens if this is implemented? I have included the press release here for further clarification.
Friday, the Obama administration presented a plan to wind down Fannie Mae and Freddie Mac by 2018, with Treasury Secretary Timothy Geithner citing "very broad consensus" that the government should play "a much smaller role" in the housing market. So what will replace them? The plan puts three options before Congress. In one option, the government would leave the mortgage market save for the VHA, FHA and other existing agencies. Two other options would set up "re-insurance" programs. A limited version would guarantee private mortgages only in economic or real estate downturns; another would provide a backstop for mortgage investments already guaranteed by private insurers. All three options would pave the way for higher mortgage costs. The Treasury and HUD have also suggested phasing in a short-term requirement for borrowers as Fannie and Freddie are unwound: homebuyers would have to put 10% down for any mortgage backed by the GSEs.
What are my thoughts? Whatever happens I know the industry will survive and adapt. Most if not all of us have made a commitment that we plan to honor. I'm not excited that it may be more expensive for the public to get a loan as we go forward. But, again, I know the industry will continue. What are your thoughts? How do you think these proposed changes
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