For decades, Fannie Mae and Freddie Mac have supported mortgage lending by buying mortgages and bundling them into securities and selling them.
This practice, backed up with federal guarantees, increased liquidity for mortgage lenders and contributed to artificially-low mortgage interest rates.
That could soon change with both President Obama and Congress in agreement that Fannie and Freddie should either be scaled down or eliminated.
Without Fannie and Freddie propping up mortgage lending, mortgage lending would revert to private lenders who would assume all the risks of mortgage lending.
That would likely lead to major changes in mortgage lending and higher mortgage fees and interest rates.
One such change could be the end of 30-year fixed rate mortgages.
We all may look back, someday, at today’s low interest rates and long-term fixed-rate mortgages and fondly remember “the good old days”.
Buying a home now, with interest rates still near historic lows, remains a good move.
Source: CNNMoney.com article
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