Offering Options -- Not Answers -- for Fannie and Freddie

Fannie Mae and Freddie MacThe Obama administration is laying out three broad options for overhauling the mortgage lending system, but will let Congress make the final decision.

The Treasury Department says in a report released Friday 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.

The three options are: end the government's role in guaranteeing most mortgages; support the mortgage market only in times of stress; or provide a government guarantee for mortgage investments created by private companies.

Under any scenario, the private sector will assume a greater role in housing finance as the government scales back its involvement. The government currently owns or guarantees more than 90% of U.S. mortgages.

The bailouts of Fannie and Freddie have cost taxpayers nearly $150 billion.

Sidestepping Explosive Questions

The report comes after years of debate about how to end the government's role in housing. The options have been discussed for years as well.

By handing the decision to Congress, the administration sidesteps one of the most complex and politically explosive questions facing the financial system. Any of the three options will almost certain force mortgage rates to rise.

Republicans have called for Fannie and Freddie to be abolished. But there is a growing recognition that drastic action would upend the housing finance system, threatening the broader economy.

A near-complete withdrawal by the government probably would end the popular 30-year fixed rate mortgage or, at least, make it more expensive. Banks would prefer adjustable-rate mortgages that would fluctuate with the markets.

End of the Hybrid Model

However, all three options maintain some level of government support, either through guarantees or through existing agencies, such as the Federal Housing Administration.

Administration officials said the proposals will end the hybrid model of public-private companies that left the public on the hook for billions when Fannie and Freddie failed.

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captmerit

let that wasteful mess fold along with all the greedy officers who have milked the system for yyeaaaaaaars

February 12 2011 at 12:18 PM Report abuse rate up rate down Reply
mullermugs32

I just love when our government attempts to regulate and chastise itself for its own faults.

February 11 2011 at 8:56 PM Report abuse +1 rate up rate down Reply
Michael

J,

I doubt that the Soros family as Hungarian Jews ever thought of Germany as a beloved homeland>

February 11 2011 at 5:49 PM Report abuse +2 rate up rate down Reply
1 reply to Michael's comment
jkennedy806

Yes, but I read a bio that George's father paid the gestapo dearly to keep his family out of the camps. George learned that people of power could be bought

February 11 2011 at 5:52 PM Report abuse +1 rate up rate down Reply
Michael

Let's see. All the banks paid back their loans with interest. Net gain for the American taxpayer. GM and Chrysler both still in hock and both will be a loss of billions to US. Fannie and Freddie lose at least, if no more mortgages go bust (unlikely) $150 billion and I have seen estimates as high as $500 billion. Social Security, Medicare, Medicaid going bust. Do we really want the gov't running anything?

February 11 2011 at 5:47 PM Report abuse +1 rate up rate down Reply
1 reply to Michael's comment
jkennedy806

they don't have a very good record do they??? How do you ease the government out of domestic affairs. Cripes and then there are the special interest groups and the lobbies oh cripes.

February 11 2011 at 5:50 PM Report abuse +1 rate up rate down Reply
Gumby

Americans spent money on gasoline like cocaine... Addicts lose houses, then cars, then everythig else.. We start complaining about bigger government but we never complained about bigger oil at all. You get the drift?? Republicans are bleeding us dry... When we grow old and we will find Meidcare and Social Security in collapse thanks to stupid lonely commuters driving to work and back home... We use 25 million baarrels of oil daily or almost one billion gallons of gasoline daily.. We are addicts until we find ourselves without nothing when we get old and sick ! What do you expect me to do?? LAUGHING AT YOUI?????

February 11 2011 at 5:40 PM Report abuse rate up rate down Reply
2 replies to Gumby's comment
slainte87

Gumby my god are you total wrong. The US is currently using about 17 million barrels a day of oil off from a peak of 19. The US used at its peak about 9.0 million barrels a day of gasoline or 372 million gallons a day now we are down under 8.5 million barrels daily but only about 5 million barrels actually coming from oil, the rest is blended with things like ethanol. You can blame the oil prices on many things, but I lay the blame at the governments feet for releasing inaccurate weekly forecast which shot the price higher by artifically inflating demand. I suggest you research www.eia.doe.gov for yourself

February 11 2011 at 6:20 PM Report abuse +4 rate up rate down Reply
Trevor

We're going broke because of people who drive to work and back? Not becuase of those who DON"T go to work? Good Lord, how did they make them so stupid?!?!

February 11 2011 at 8:13 PM Report abuse -1 rate up rate down Reply
billykopf

Does anyone actually think these "options" would be on the table if the Democrats had not been "Kicked" last Nov? As recent as last July, the Democrat majority voted to keep low down payment requirements in Fannie/Freddie loans under the ideology of "Right to Home Ownership" Where was the due diligence two years ago?? Couple this with failing political/government oversight of the business plans and funding of Social Security, Medicare, Mortgage Write Downs, Postal Management and $800 billion "Stimulus", and, tell me how the Healthcare Bill will be Different?? Politicians are about Power and Money--Tax and Print as much money as needed to hold power by distorting govenment social programs to fit the Power-Money Cycle.
The worst offenders are the advocates of Wealth Redistribution. Nov, 2010 was a good start; Competitive Free Enterprise, how all in Office got where they are, is the best direction for crisp, controlled fiscal responsibility.

February 11 2011 at 4:22 PM Report abuse +3 rate up rate down Reply
jkennedy806

And it just keeps getting better, Pres BO wants options for Fannie and Freddie why?? Cause GS (Daly) bankrupted AIG. Knowing the unethical transactions, Tim Geithner came to the rescue and bailed out with US taxpayer dollars Warren Buffet also a large contributor to the Goldman Sach's lets bailout the goons cover-up is now telling President O that to big too fail will always be with US. And then to top it all off, Germany, beloved homeland of George (love that Obamma fellow) Soross, is merging wit the nYse. what a tangled web we weave when we practice to deceive. Did you hear the Greeks got mad today and stormed the Greek exchange

February 11 2011 at 4:16 PM Report abuse +2 rate up rate down Reply
2 replies to jkennedy806's comment
Michael

Soros is Hungarian, not German.

February 11 2011 at 5:38 PM Report abuse +1 rate up rate down Reply
jkennedy806

During WWII it was under Nazi occupation it was German

February 11 2011 at 5:45 PM Report abuse rate up rate down Reply
Hello Mr. Yaseen

This situation will never change unless our government takes control of the banking system. Its quite simple as banks are no longer in the banking business. If the Federal Reserve allows banks to receive money at virtually 0% and then those same banks purchase bonds that return 3% to 4%, then for the majority of Americans the economy will only get worse. Our monetary system was corrupted by both Republican and Democratic think-tanks as well as those entrenched within the banking and investment clubs. Best of luck to one and all because by the time the dust settles, there will be no small business as we know it, and the housing market will continue to be flooded well beyond what you could ever imagine.

February 11 2011 at 3:33 PM Report abuse rate up rate down Reply
2 replies to Hello Mr. Yaseen's comment
jkennedy806

We could use real money right now, it had value, which is more than I can say for our QE dollar.

February 11 2011 at 5:47 PM Report abuse rate up rate down Reply
sgentilejr

The housing market and banking mess ALREADY exists and Blaming and pointing fingers is not going to help or make the problems go away. The need SOLUTIONS, not finger pointing.
IF the federal government stops backing and supporting Freddie and Fannie home sales will decline further and home prices will continue to fall. If the government stops those programs it will become far more difficult for anyone to buy a home and banks would require much larger down payments of 30% or more of the home valuation to protect themselves from losses.
President Obama was correct in passing off the problem to Congress to let Congress decide what to do. Congress's job is to make the laws and the regulations___Obama's job is only to either sign or veto what Congress does.
It is not the Presidents job to make laws or rules and regulations.

February 11 2011 at 2:13 PM Report abuse rate up rate down Reply
sgentilejr

WOW______After reading many of these posting it appears that everyone is saying that the American Public and the Home Buyers were all too freaking dumb to know they could not pay a $2,500 per month mortgage on their $2,400 per month income.
It is sad indeed if it is true that so many Americans are so limited in their mental capacity and that they do not possess the intelligence or mental capacity that they all honestly did not know they were all buying homes that there was not possible way to make the mortgage payments on and getting in over their heads.
That explanation (they did not know) is like saying they are so dumb they go into grocery stores with only $5 in their pockets and think they can buy $60 worth of food with just $5

February 11 2011 at 1:58 PM Report abuse -1 rate up rate down Reply
1 reply to sgentilejr's comment
jkennedy806

This has nothing to do with who was lying to who. It's out there -- all these gangster bankster goons wanted was that instument, bundled up with other mis-represented mortgage notes and sold as CDO's. then the goons go to AIG and get insurance on the crap. Then the banksters knowing that the notes were going to fail anyway, cause the plan was to market loan orgination to get more mortgage notes, bundle them up and sell them as CDO's go to AIG and get an insurance policy for the train wreck that was eventually going to happen
It was fraud, predatory, collusion it was illegal.

February 11 2011 at 4:22 PM Report abuse +1 rate up rate down Reply