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Privatizing Fannie & Freddie could send mortgage rates soaring -- report

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Mortgage Professional America | 20 May 2015, 06:15 AM Agree 0
Many frustrated shareholders in Fannie Mae and Freddie Mac want the mortgage finance giants released from federal control. But that might not be so great for the mortgage industry, according to a new study
  • NoSpin JustFacts | | 20 May 2015, 07:13 AM Agree 0
    If FF were released from the federal government bureaucracies as required under the 2008 Housing and Economic Recovery Act (HERA) and the treasury department returned the illegally taken profits after FF paid back the full $187.4 billion plus 10% dividends advanced by taxpayers, their capitalization would be well on its way to being restored.

    The government back drop to FF in the housing market has now been proven to be a viable option. Taxpayers have fully recouped their investment in FF after the worse housing market environment in modern history.

    It is time to reform FF so the future Barney Franks can not force FF into making bad mortgages that led to the housing meltdown.

    If you have not already noticed, effective September 1, 2015 FF are already increasing the Loan Level Pricing Adjustments, particularly upon the least risky 740+ credit scores as well as all investment properties and cash-out refinances. It is not privatizing that is causing mortgage rates to begin soaring. This article has been written not based upon facts, rather based upon Zandi's infatuation with moving the U.S. into a European style socialism. Mr. Zandi has been an ardent supporter of President Obama's Big Government.
  • PMarron | | 20 May 2015, 07:16 AM Agree 0
    I agree with this. There are mortgages in the gray area with Fannie Mae/Freddie Mac that are being offered by non-QM lenders at substantially higher interest rates. There is no desire to resolve issues, even if mortgages could go into portfolio, be seasoned and then made available to Fannie Mae/Freddie Mac. The extra profit being made on non-QM mortgages appears to distract from working on solutions that can make more mortgages eligible for Fannie Mae/Freddie Mac.
  • jburns | | 20 May 2015, 10:26 AM Agree 0
    Higher risk borrowers should have higher rates. Whether it is caused by LTV, credit history, DTI or a combination, it is a risk reward relationship. It incentifiies higher risk borrowers to strive to improve their situation. Higher risk borrowers interest rates are mitigated by mortgage insurance, always have been, that is the purpose of mortgage insurance, that is not even mentioned in the article. Niether is the FHA option that is also designed for the higher risk borrower. People who are not familiar with mortgage lending should not be making rules that affect it period. They have no clue how the real world of capitalism works, and should continue to work properly without their uninformed input. The best examples would be Barney Frank, Chris Dodd, Bill Clinton and the people they put in charge to Fannie and Freddie who had no idea what they were doing, which eventually caused the problems we have today. Depending on how the privatization of Fannie and Freddie is structured, the only influences (other than the open market) on interest rates would be the borrowing costs to the private company vs the Federal Government borrowing costs, and the guaranted pass through to the MBS investor, and the resulting rating of the bonds.
  • Popular Economics Weekly | | 20 May 2015, 04:22 PM Agree 0
    Actually, costs are already higher for 'higher risk' mortgages, which they presumably mean not fixed rate with less than 20% down, or with lower credit scores. Fannie/Freddie add as much as 1.5 pts. to riskier mortgages, so why would there be additional costs? Markets have already priced in the additional risks.
  • | | 02 Jun 2015, 09:09 AM Agree 0
    I don't know, maybe I am too old and in this business way too long, but I remember the 18% mortgages. 1% does not exactly say, "mortgage rates are soaring".
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