Massive Mortgage Changes

Big news in the real estate world today!

Fannie/Freddie On Chopping Block –The white house came out with their mortgage reform options today, including the shut-down of Fannie/Freddie. There is a lot of analysis going on, here’s some from CNBC / CNN / WSJ

The Obama administration laid out three broad options Friday for reducing the government’s role in the mortgage market. All three would almost certainly lead to higher interest rates and costs for borrowers making it even harder to qualify for a home loan.

The administration said in a report that the government should withdraw its support for the mortgage market slowly, over five years or more. The report describes a path for winding down the troubled mortgage giants Fannie Mae and Freddie Mac.

But rather than making a single recommendation, the administration offered Congress three scenarios and will let lawmakers shape the final policy.

The options are:

  1. No government role, except for existing agencies like the Federal Housing Administration.
  2. A government guarantee of private mortgages triggered only when the market is in trouble.
  3. Government insurance for a targeted range of mortgage investments that already are guaranteed by private insurers. The government guarantee would kick in only if those private companies couldn’t pay.

The private sector will assume a greater role in housing finance under all of the options. The government currently owns or guarantees more than 90 percent of new mortgages.

Also, Cash Buyers Way Up - The WSJ is reporting a huge jump in all-cash real estate transactions – and many home sellers are actively seeking a cash transaction due to distress and the uncertainty of buyers to get a mortgage.

The actual report – If you prefer to read things for yourself, below is the report, Reforming America’s Housing Finance Market: A Report to Congress – The report may take a minute to load.

Download (PDF, 405KB)

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