Do We Need Fannie and Freddie?

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It's scary how anybody with an opinion can be considered an expert. This so called expert seems to be clueless of the fact that the main reason there was a financial meltdown was because of exotic mortgage products of the ARM variety. When the loans were set to change the interest rates and subsequent payments were too high for borrowers to afford to repay the loans.
You would think you would at least have to understand the basics before you testify about what you think needs to happen and to suggest a trail and error solution. If you haven't figured out the solution and don't understand the cause of the problem you shouldn't be telling anyone including Congress what they need to do.

why of AL 5:54PM June 27, 2011

When you have had your mortgage for a long time, it is not a good idea to Refinance, let me stress again, DONOT refinance if you have your mortgage for long time, to avoid mistakes, use "123 Mortgage Refinancing" articles.

marcus kim of CA 3:33AM June 02, 2011

Professor Sanders is full of sh... The Government did not drive the private sector to investing in risky loans. The private sector's greed did drive them to investing in risky loans.

D. Waters of GA 10:00PM June 01, 2011

Additional cash infusion is not the answer. No, rates will not go up to 9%-10% range. The notion that the sheer existence of Fannie Mae and Freddie Mac is what keeps rates low is nonsensical. Rates are low because the cost of borrowing is low. F and F sets them low only because their ability as a government sponsored enterprise to borrow from the fed for years at essentially a zero interest rate gives them plenty of room for markup/spread to cost when setting the rates. Their portfolio of risky derivatives and CDO type balance sheet items has ALREADY made them insolvent. They're not a mortgage company anymore, folks..they're a money company. And they are nothing more than insolvent, bankrupt, penny stock companies that are gushing red-ink from every orifice because Congress forced them to buy loans made to individuals who could not pay them back. It violated the most basic tenet of banking...lend to those who will pay back, and don't to those who won't. The refusal and fear of lenders and F and F to 'just say no' to unqualified borrowers and political pundits looking ONLY to be able to tell their constituents "see, I have provided cheap financing for houses to thousands of registered voters" in this politically correct environment is the cause. It amounts to nothing more than every firm in the line not having the courage to say the emperor isn't wearing any clothes.
Banks get low interest funding from FHLB and other federal sources (including long term deposits) and lend it out at higher rates already. So it's not Fannie and Freddie keeping the rates down. As long as spread to cost of funds can be maintained by banks, there's NO NEED for them to raise rates to 9-10%. And as long as FHLB lends to banks at fed funds rate of 25bps, spread can be maintained. And in this competitive, tight credit environment, I promise you..if one bank says 10% rate, his competitor down the street who has managed his balance sheet properly will offer you a mortgage at 8.5%...and so on. THAT's called free enterprise and competitive business environment..and that's how it's supposed to work. Need Fannie (a Roosevelt era dinosaur along the lines of the WPA and CCC) and Freddie (chartered ONLY because the S and L industry wanted their own proprietary 'Fannie")?
Naaaahhh.....

Hansom A of TN 5:03PM June 01, 2011

what happens if your little experiment fails. do you bring down the us economy, or the world economy? you get the nobel for turning us back to the stone age?

taintedfud of MD 2:29PM June 01, 2011

I guess we should also get rid of the home interest deduction too and raise real estate taxes. Let's make it so only the super rich can afford real estate.

bob of KS 12:48PM June 01, 2011

Fannie/Freddie selling the assets would raise mortgage rates to the 9-10% range completely destroying any chance of the housing sector coming back. Their portfolio of risky derivative and CDO type balance sheets items would make them completety insolvent. In 2007 Fannie/Freddie were the only game in town as banks stopped issuing mortgages at low interest rates, today no better having better returns from overseas investments. The 17% of subprime sub A mortgages in their portfolio would have nothing to insure a greater bailout than the current 138 billion we have already spent. The 90% of 30 year fixed rates have 10% of mortgages underwater, only an investor looking to write off some losses would be interested in buying something with a possible 10% total loss. Jobs this month have severely been curtail from the 177,000 to 34,000 per ADP. The markets worldwide have lost over 1% of equity seeing demand get lowered. That loss means even more defaults. Without an infusion of cash to increase demand, the GOP drawing lines in the sand to reduce the demand, the gov't about to default Aug 2, no one would chance buying Fannie/Freddie mortgages. 1% they would not go that high to invest in a losing proposition with possible 10% losses.

Jimbo of NY 12:44PM June 01, 2011