Entries in Fannie Mae (4)


Fannie & Freddie to be Replaced?

Tennessee Senator Bob Corker introduced legislation Tuesday to replace mortgage finance giants Fannie Mae and Freddie Mac with a new government agency.

Since the 2008, Fannie, Freddie and other government-backed agencies have insured nearly 90 percent of new mortgages. While that has made home loans widely available despite the financial upheaval, it means taxpayers are at risk if homeowners default on their loans.

Corker has proposed that a borrower would either have to put 20 percent down to get a government-backed loan, or, if the borrower put down less money, would have to pay for mortgage insurance to make up the difference.  Under this plan the government would create a new single agency, modeled after the FDIC to insure these mortgages.

This proposal is similar to the way mortgages were made before the Savings and Loan Crisis and is modeled after the way most mortgage loans are made in many other countries.

But the way the government structures the loss and capital requirements could make it more difficult for borrowers to get a home loan, or more importantly could drive up the costs for loans.  But the restructure is needed and this bill will provide a way to begin the conversation.


BOA Just Says No to Fannie Mae

Bank of America said Thursday that it would no longer sell new mortgages to Fannie Mae.

This is the latest news in the continuing saga of what role the mortgage giants Fannie Mae and Freddie Mac will play in this country’s residential housing future, and is the latest news in the fight over how many defaulted mortgages Bank of America will have to buy back from Fannie Mae because the original loans had not conformed to proper underwriting standards.

In mortgage circles this is huge news.  Bank of America was Fannie Mae’s third-largest provider last year and the bank originated $156.1 billion in mortgages last year of which $37.7 billion were sold to Fannie Mae.

Meanwhile, Fannie and Freddie face questions over what role they will play in the housing market.  On February 21st the Treasury Department’s new housing reform report was issued, and the report concluded that Fannie Mae and Freddie Mac must be eliminated - period.

Of course if Fannie Mae and Freddie Mac are eliminated most economists expect that average interests would increase and that it would be harder to obtain a traditional 30 year fixed rate mortgage.


Cost of Secondary Loan Bailouts to Exceed Fifty Billion

Fannie Mae and Freddie Mac will cost taxpayers $51 billion between 2012 and 2021, according to a new estimate released by the Congressional Budget Office.  Since placing the government-sponsored enterprises in conservatorship in 2008, the Treasury Department sent $170 billion in subsidies through the second quarter, of which $27.9 billion has been paid back.

The Congressional Budget Office estimates that the yearly payments to Fannie and Freddie should go down, and the current estimate is that $5 billion will be sent to both mortgage giants by the end of 2011..

The outlook for the long-term mortgage market remains tentative. Fannie, Freddie and the Federal Housing Administration guaranteed or financed 95% of new mortgages in 2011.


Eight Ways to Kill the GSES

Eight bills designed to deflate the power of Fannie Mae and Freddie Mac passed the Capital Markets and Government Sponsored Enterprises Subcommittee last week.

Cumulatively, the legislation would curb excessive compensation for Fannie and Freddie executives, end affordable housing goals, increase guarantee fee requirements and end new business activity at the GSES.

The bills were proposed by Republican lawmakers who desire a quick shift to a mortgage market supported mostly by the private sector. The government had to bail out Fannie and Freddie three years ago and has since injected $150 billion into the GSES.