Treasury presents proposals for less government in mortgage system. WASHINGTON — The Obama administration wants to shrink the government's role in the mortgage system — a proposal that would remake decades of federal policy aimed at getting Americans to buy homes and would probably make home loans more expensive across the board.
The Treasury Department rolled out a plan Friday to slowly dissolve Fannie Mae and Freddie Mac, the government-sponsored programs that bought up mortgages to encourage more lending and required bailouts during the 2008 financial crisis.
Exactly how far the government's role in mortgages would be reduced was left to Congress to decide, but all three options that the administration presented would create a housing finance system that relies far more on private money.
"It's clear the administration wants the private sector to take a more prominent role in the mortgage rates, and in order for that to happen, mortgage rates have to go up," said Thomas Law ler, a housing economist in Virginia.
Abolishing Fannie and Freddie would rewrite 70 years of federal housing policy and transform how homes are bought and redefine who can afford them. Treasury Secretary Timothy Geith ner said the plan would probably not happen for at least five years and would proceed "very carefully."
Fannie and Freddie own or guarantee about half of all mortgages in the United States. Along with other federal agencies, they played some part in almost 90 percent of new mortgages over the past year.
The two agencies buy mortgage loans from primary lenders, pool them, and sell them with a guarantee that investors will be paid even if borrowers default. The idea is to give people a chance to buy homes at affordable interest rates.
But the two nearly collapsed in 2008, after the subprime mortgage market collapsed and defaults and foreclosures piled up. So far, they have cost taxpayers almost $150 billion and could cost up to $259 billion, the Federal Housing Finance Agency says.
Source: http://www.denverpost.com
