According to a recent poll conducted by HousingPredictor.com, a large majority of consumers say they want the government-sponosred enterprises (GSEs), Freddie Mac and Fannie Mae, to halt buying mortgages. The opinion poll found that 72 percent of respondents want the GSEs to stop purchasing home loans from banks and mortgage lenders. Only 28 percent felt the GSEs should continue buying home loans.
To date, the GSEs have been bailed out by taxpayers at a cost exceeding $184 billion for failed mortgages it purchased during the real estate bubble. Fannie and Freddie were taken over by the Federal Housing Finance Agency (FHFA) four years ago, and since then proposals have been made to repair the government enterprises. The FHFA was formed by the Obama Administration to oversee the lending giants, but Congress has failed to reach an agreement to repair or replace the lenders, despite a series of proposals offered by a legion of Congressional leaders.
In the meantime, an estimated 85 percent of U.S. mortgages being underwritten in the current financial climate are being purchased by the GSEs. Financial analysts are concerned about how the nation’s mortgage market would do if the mortgage giants halted buying loans from lenders. Fannie and Freddie purchase the loans and then re-sell them as securities to investors.
Commercial banks and savings and loans lent to borrowers much more aggressively before the financial crisis in 2008. But a series of bank failures and the foreclosure crisis has led to a slowdown in mortgage lending. Lenders are requiring higher credit scores and proof of income to make home loans with higher downpayments.
