You may have heard? The future of FNMA and Freddie Mac is in jeopardy.
These Government Sponsored Enterprises (GSE’s) were originally created to provide a funding source for socially desireable but higher risk loans. When started, GSE’s provided funds for 30% of all loans. Today, that number is 90% — and steps are being taken in Congress to get government out of the lending business or at least scale it back.
Freddie Mac recently published a Memo that starting June 1st, they will no longer purchase loans with loan-to-value ratios of less than 5%. As these GSE’s retract from the marketplace, interest rates and down-payment requirements are likely to rise making home ownership less achievable.
But that’s OK (I guess). I’m sure some smart banker or government type will come up with the new ‘best thing ever’ and create a program to let people who can’t afford a house to buy one anyway. That is, after all, how we got into this mess in the first place.