January 8, 2009

The Future of Freddie Mac

There is a lot of discussion about how to fix Freddie Mac. These entities are now practically nationalized, but that is just the short term. The Govt is looking into how to restructure them and return them to some kind of independence in the marketplace. The U.S. is not in the mortgage business.

Some of the ideas being kicked around for the "new" Freddie Mac" are:
Fully Privatize Freddie; One criticism of Freddie was that it became to big and stopped becoming fiscally responsible. One answer to this problem would be to break up Freddie into much smaller regional entities. This way, if one of the Freddies became so fiscally irresponsible it couldnt cause a national disaster. This is one way to minimize risk. Outgoing Secty of the Treasury thinks that this model would create as many inefficiencies as the existing model.

Paulsson would rather see a kind of Govt mortgage credit guarantor. He thinks that Congress should create private entities that would buy up mortgages guaranteed by the Federal Government. The entities would be regulated with a rate setting commission that would also review and approve mortgage products.

If rates were controlled and mortgage products reviewd, we may find the kind of teaser rates that seduced many into taking on too much risk and signing off on predatory mortgages eliminated. That would allow the Capitalist system to function and yet create strong Governmental oversight to keep the industry from ever making such drastic mistakes again.

The FDIC also has a progrqam to buy mortgages which is gaining ground. These kinds of actions can directly lower mortgage rates and other types of consumer debt. In effect, the Fed is stepping up in big way with the explicit goal of driving down these interest rates. If it is prepared to buy enough debt, it can drive these rates down.

I would also like to see the Fed buy up the 10 Treasury bond that so many variables are tied to. This would in effect, allow the Govt to buy its own debt and lower rates in the process.

Thanks for Reading

Howard Bell


A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF


Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.

Snap News updates real estate markets and all things of interest to property owners and real estate professionals

Your Property Path Amazon Store


super deals on agent open house tools We hand picked Amazon for the tools you need

No comments: