Goodbye Mac and Mae
Goodbye and good riddance says Rep. Barney Frank to Fannie Mae and Freddie Mac. In his opinion, both mortgage agencies need to be closed for good. Once that’s accomplished, the housing finance system can be rebuilt right.
This is a pretty shocking turn of events in the unfolding housing program restructuring. Rather than fix issues individually, Frank believes the current program needs to be rethought from the ground up. This new trend comes on the heels of announcements claiming unlimited government support for the two mortgage giants. That in turn follows more than $100 billion to cover mounting losses.
Though he didn’t provide many details, coming from Frank, a long time proponent of the government-backed agencies, this can only mean a shift in Washington policies. Treasury Sec. Geithner recently stated in an interview that while changes might only happen next year when they do they’ll be the product of a “cold, hard look” at both organizations.
These two entities are the basis of the govt.’s programs to bolster the housing market. Currently they seem to be the government’s only way to bolster sagging housing prices. And according to S&P, any change in support for Fannie and Freddie would have to be carefully weighed against the effect it would have on mortgage premiums.
The US residential mortgage market stands at $11 trillion. Fannie and Freddie stand behind 51% of that. And behind them? Well, the US government, for now. Without that backstop, would enough private investment move in to fill the void?
What do you think?
