Is Dumping Fannie and Freddie a Smart Idea?
In Ken Harney's editorial today, he discusses what a totally private mortgage market would look like if the administration follows through with it's plan to liquidate Fannie and Freddie and get the government out of the mortgage business.
It wasn't too long ago that most of the real estate profession thought it time to do just that. The question to ask yourself is "Then What"? A completely privatized mortgage market completely controlled by the big banks and Wall Street.
We have seen how these institutions think and have quite a lot of evidence to back that up. Is this really where real estate that has been making a comeback as an economic engine for the US economy needs to go?
I hope you will read Ken's article because he points out what would be painfully obvious. The cost to consumers would not only go up but understand that banks might likely prefer shorter terms than our most popular 30 year fixed mortgage. And not only would they likley shorten the term but maybe putting more risk of the interest rates back on to future homeowners in the form of adjustable rate mortgages.
I think we have been there too. Fannie and Freddie are making huge profits for the government of late and they have also paid back in the form of dividends, a large portion of what government provided in bailouts to right their respective ships. Seems to me that if they are making a huge profit and still able to lend, why rock the boat at this point.
I think serious minds in our industry need to reflect on this carefully before taking a position with the potential of pushing real estate financing over the proverbial cliff. Just saying!