Chopping Up Fannie and Freddie - Short Sale Fundamentals
 
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22
Feb

Chopping Up Fannie and Freddie

privatizing the GSE marketAt last – a ray of hope! A beacon shining through the mist of Washington chaos pointing a way towards a brighter future.

Okay, so that intro was a little melodramatic, but sometimes it feels that way. And especially after all of the horrific revelations about Freddie Mac that came out recently, it’s unbelievable refreshing to hear some common sense break the surface. So here’s the latest I’ve heard:

The FHFA (please don’t tune out just because you hate them) laid out a plan to phase out Fannie and Freddie and let the private sector take over their roles.

Woohoo!!

Now don’t get caught up in the excitement and think those clowns up there actually know how to do what they want to do, but at least they want to do what they want to do. To do. Um, maybe that was too much.

Either way, they WANT to get mortgage securitization out of the GSE’s hands and move towards a more privately backed industry. I give them full props for that, let’s just hope they develop a plan to do it. (For starters they admit right up front that the two GSEs put up $100 billion in new mortgages per month and no one can currently match that.) So the challenges are very real, but not hopeless.

Of course, prices will “rise.” But if you count how many hidden costs already exist, plus the ridiculously high cost of the “bailout” you’ll see it won’t be more expensive in the long run.

Only smarter and better run.

Any thoughts? I know you’re all itching to chop up Fannie and Freddie so feel free to let loose.

  • http://www.facebook.com/bryanellis Bryan Ellis

    As always, a cursory reading of news yields bad conclusions.

    The FHFA is proposing winding down Fannie and Freddie by raising fees so borrowers will have motivation to use private lenders.  That’s all.

    The Obama administration wants Fannie & Freddie to grow further still.

    Anyone experienced with real analysis of current events can easily predict what *will* happen, what will *probably* happen, and what will *not* happen.  Here are those answers:

    WILL HAPPEN:  Costs to borrow from Fannie and Freddie will increase.  Obama will not refuse that.

    PROBABLY HAPPEN:  There is no positive impact on the mortgage market as a result of these price increases.  Borrowers will simply pay more, but will still be subject to near-monopolies from Fannie and Freddie because, for the moment, private lenders are not willing to take the idiotic risks that Fannie and Freddie will accept.

    NOT GONNA HAPPEN:  Fannie and Freddie aren’t going anywhere, particularly as long as the current administration is in power.

  • Ednalakerealtor

    The people that fell through cracks or that applied for help but were denied are the debri along the way.  They are the victims, while others made huge profits and bonuses as result of the government bailout.



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