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17 Aug 11 Obama Warming to Idea of Helping Mortgage Giants Fannie and Freddie

President Obama announced yesterday that he is leaning towards funding a reorganization of the two failing government mortgage agencies Fannie Mae and Freddie Mac. The White House and Treasury Department also acknowledged that the Obama administration is working on a plan to continue the U.S. government’s role as an insurer of home mortgages for most home buyers, keeping the struggling Fannie Mae and Freddie Mac under government management.

Fox News reported that one of the options would be to restructure Freddie Mac and Fannie Mae as public utilities managed by a government regulator. The second option being considered would be to eliminate the mortgage lenders role in the loan origination process and replace them with “successors that would have their mortgage securities guaranteed by the government in exchange for a fee.” A third option is to wind down the home financing giants and limit government’s role in insuring loans to other agencies.

Not surprisingly, the White House would not commit to any specific plan as Obama continued his bus tour. According to White House spokesman Jay Carney, “It is simply untrue that the administration has settled on a single proposal for the longer-term structure of the home financing market.” Carney stated, “The article in question mischaracterizes a lot of the core housing and finance principles that the administration laid out in its February report to Congress.”

Deputy Treasury Secretary Neil Wolin also issued a statement saying that the three options outlined in the report to Congress allow for the government’s “footprint in the housing finance market” to “shrink substantially.” Wolin continued, “For now, Fannie Mae and Freddie Mac are playing a critical role in providing support to a still-fragile housing market and making mortgage credit available. However, in each of the three options, Fannie Mae and Freddie Mac will be wound down on a responsible timeline.”

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Reader's Comments

  1. |

    It is uncertain how these proposed changes would affect future mortgage rates. Currently, home loan rates are at historic lows, but how many people actually qualify for these loans? Home mortgage rates are some of the best rates they’ve ever been right now for borrowers. Now is a good time to borrow if you are in the market for a new home or to refinance.

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