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Fannie Mae and Freddie Mac Would Disappear in Proposed Bill

Bloomberg reported yesterday that Rep. Jeb Hensarling, who is the vice chairman of the House Financial Services Committee, plans to propose new home loan legislation that would do away with Fannie Mae and Freddie Mac within five years. Freddie Mac and Fannie Mae have been under the conservatorship of the FHFA since 2008, when the government seized the two quasi-governmental agencies in order to prevent their insolvency.  The latest HARP mortgage has been able to assist thousands of homeowners in their quest to get a lower rate. Since that time, they have drawn more than $150 billion from the Treasury.  The government has pledged an unlimited amount of funds to backstop their losses.  Estimates of the total costs of the bailouts vary, but most believe the whole figure to be somewhere between $200 and $400 billion.  Freddie and Fannie either own or guarantee over 90% of home mortgages in the United States.

Fannie Mae Freddie MAC

Home refinancing guidelines continue to be tightened, because loan defaults continue to rise. “The financial crisis was caused by failed federal policies that strong-armed, invented, and cajoled financial institutions into loaning money to people to buy homes that they couldn’t afford to keep.  At the epicenter of this were Fannie Mae and Freddie Mac.”  I hate to think this line of thinking is the motive behind this proposed bill. This is a thoroughly discredited notion.  Fannie and Freddie absolutely bear some responsibility for the financial crisis, but the fact of the matter is that private lenders originated the vast majority of Alt-A and subprime mortgages.

Posted in Home Financing Articles, Mortgage News, Published Article.

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