The end of the 30 year mortgage?

Without Loan Giants, 30-Year Mortgage May Fade Away

Excerpt:

How might home buying change if the federal government shuts down the housing finance giants Fannie Mae and Freddie Mac?

The 30-year fixed-rate mortgage loan, the steady favorite of American borrowers since the 1950s, could become a luxury product, housing experts on both sides of the political aisle say.

Interest rates would rise for most borrowers, but urban and rural residents could see sharper increases than the coveted customers in the suburbs.

Lenders could charge fees for popular features now taken for granted, like the ability to “lock in” an interest rate weeks or months before taking out a loan.

Life without Fannie and Freddie is the rare goal shared by the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.

The reasons by now are well understood. Fannie and Freddie, created to increase the availability of mortgage loans, misused the government’s support to enrich shareholders and executives by backing millions of shoddy loans. Taxpayers so far have spent more than $135 billion on the cleanup.

The much more divisive question is whether the government should preserve the benefits that the companies provide to middle-class borrowers, including lower interest rates, lenient terms and the ability to get a mortgage even when banks are not making other kinds of loans.

Comment: Ending Fannie Mae and Freddie Mac would be a good thing. Years ago 15 and 20 year loans were the norm. A close family member in her mid-20's bought a home with a 15 year loan. We just paid off a 15 year loan ourselves. Cheap credit fueled the housing bubble. 6 years ago I was talking to a mortgage broker and he was telling me that he was selling 40 year mortgages ... my view then ... CRAZY

92% — The share of new mortgage loans backed by the U.S. government

Government’s Overwhelming Role in Mortgages

Excerpt:

Fannie alone ranks as the world’s largest bank by assets, while Freddie is in the top ten. The firms’ subsidized mortgages encourage Americans to take on a lot of debt. Their balance sheets, consisting of long-term investments financed with short-term borrowing, make them highly susceptible to sudden credit freezes. Their government ownership means taxpayers stand to lose tens of billions of dollars if the firms get into trouble again.

...

On Friday, the U.S. Treasury published a “white paper” with some ideas on how to handle the behemoths. Fannie and Freddie can curb borrowers’ ability to get too deep into debt by requiring larger down payments and lowering loan limits. They can increase the fees they charge for mortgage guarantees to bring those fees more in line with the risk they’re taking on. And they can gradually wind down their businesses, ceding the market to private lenders who must have ample capital to protect them from bankruptcy in the event of losses. All that can help remove market distortions and save taxpayers’ money.

Comment: Time to phase Fannie Mae and Freddie Mac out of the Mortgage business. Begin to close the doors now and fully shutter them in 5-7 years! Click through to the WSJ article for a helpful chart.

Harbinger for bad Freddie Mac news?

Police: Death of Freddie Mac's Kellermann may be suicide

Excerpt:

he acting chief financial officer of mortgage finance giant Freddie Mac was found dead Wednesday morning at his home, police said.

David Kellermann was found dead of an apparent hanging, a source familiar with the investigation told CNN.

There were no signs of foul play when officers arrived at the home in Vienna shortly before 5 a.m., said Lucy Caldwell, a spokeswoman for police in Fairfax County, Virginia. She said the death "may have been an apparent suicide."

A second Fairfax County police spokesman, Eddie Azcarate, said Kellermann's body was found in the basement.

Comment: Makes one wonder if he knows something about Freddie Mac's finances that the general public will soon come to know! Very sad for his family!

Update: Friend says Freddie Mac exec chased success

A Bay City attorney says he is shocked that former high school classmate and Freddie Mac executive David Kellermann would commit suicide.

Jeffrey Martin described Kellermann as someone who worked hard to be successful.

They graduated in 1985 from T.L. Handy High School in Bay City, about 90 miles north of Detroit. Martin says Kellermann wanted to be "Alex P. Keaton," the television character played by Michael J. Fox on the 1980s sitcom "Family Ties."

He says Kellermann "knew he wanted to climb the corporate ladder, and he climbed the corporate ladder."

Comment without Christ: “ Vanity of vanities,” says the Preacher; “ Vanity of vanities, all is vanity.” (Ecclesiastes 1:2)