There is renewal in the proposals to reform Fannie Mae and Freddie Mac, which seek to privatize these government-backed programs.
If you remember, Fannie Mae and Freddie Mac were blamed for the financial crisis that stemmed from sub-prime mortgages. At first, these two organizations were disbanded as the country dealt with the after-effects of the financial crisis, yet as the real estate industry is picking up again, so are these enterprises. And the debate rages on, as these quasi-public organizations take on private aspects of their function and structure.
As part of a larger political debate, Fannie Mae and Freddie Mac are caught in a tangled web in Congress. While Congress has been battling on what to do with these two publicly traded programs, homeowners are left wondering how they will be affected.
Originally, these institutions were created to save the banks during the Depression of 1929 as homeowners defaulted en masse on their mortgages. But as they grew over the years and employed riskier methods to make more money (think sub-prime mortgages), they are now identified as a major source of the 2007-2008 Recession.
It is unknown what would happen if legislation does not pass to reform Fannie Mae and Freddie Mac. We believe private participation could mean “higher rates of return, thus boosting the cost of capital and more guarantees, leading mortgage markets to contract and grow more expensive, as noted in this article.
But, we agree something must be done as sub-prime mortgages are once again showing up in the marketplace because of an appetite for higher returns on investment in the buying and selling of mortgages.
Many housing markets throughout the country have recovered from the housing bubble in 2007-2008, and are now at their strongest since that time. Construction is picking up, and residential mortgages approvals are much easier to obtain than just a few years ago.
Boosted by the tech industry, the Triangle area is a booming city, with housing available for renters and homeowners alike.
Whatever the effects of the outcome over Fannie Mae and Freddie Mac, Raleigh residential homeowners should rest assured that mortgages would remain affordable and accessible.
Do you have a question about the Fannie Mae and Freddie Mac debate?
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Tags: Fannie Mae and Freddie Mac, financial crisis, government backed mortgages, mortgage loans, subprime laons
