Fannie Mae and Freddie Mac are raising fees in 2012. Is this good or bad for recovery?
When my business partner and I first started in the rehabbing business, my husband, our general contractor, called us over to look at a problem we had on one of the houses. My business partner looked at it and innocently said to him, "Ron, can't we just lop it off." We thought Ron was going to have a heart attack on the spot and still laugh about the incident.
Nothing is that easy and definitely fixing the current housing market debacle has many facets that require careful thought.
Fannie Mae and Freddie Mac are the country's two largest mortgage finance providers. They were seized by the government three years ago during the Bush administration amid fears of failing. They provide financing to banks by buying the mortgages and then keeping them or selling them to investors. The investors then pay Fannie Mae and Freddie Mac a guarantee fee. For a more detailed explanation read Reuters post.
Bottom line of raising the fees, we all know, is more costs to the borrower which probably equates to a higher interest rate on the mortgage.
But here are some of the issues:
The cost of the bailout has cost the taxpayers between $130 billion and $317 billion according to varying reports.
Fannie Mae and Freddie Mac have serious delinqueny rates.
Standard & Poor downgraded Fannie Mae and Freddie Mac to AA+ from AAA+ which will increase their borrowing costs.
Housing Chief Edward DeMarco's focus is on conserving Fannie and Freddie's assets not on the health of the housing market according to one White House housing adviser.
It is definitely not easy to know the right course of action to recovery but...
If you are thinking of buying, the timing is right to buy before the spring market.
Comments (2)Subscribe to CommentsComment