Groundhog Day

Fannie and Freddie will buy more underwater mortgages

And all of us will pay for it.

The U.S. government is considering expanding its mortgage refinancing program to include borrowers whose mortgages are not backed by Fannie Mae (FNMA.O) and Freddie Mac (FMCC), the Wall Street Journal reported, citing people familiar with the discussions. (
The refinancing program now being considered also seeks to include “underwater” borrowers who owe more than their homes are worth, the Journal said.
The proposal would also transfer potentially riskier loans held by private investors to the government-sponsored mortgage entities Fannie Mae and Freddie Mac, the paper said.
Such a move would require congressional authorization to temporarily change the charters of Fannie Mae and Freddie Mac, according to the Journal.
About 22 percent of all homes with a mortgage, or around 10.8 million homes, down from 12.1 million last year, were worth less than the outstanding balance at the end of June, the Journal said, citing data from CoreLogic.
Under the proposal, Fannie and Freddie would be allowed to charge higher rates to borrowers in order to compensate for the risk of guaranteeing refinanced loans that are underwater and more likely to result in default.

So all borrowers will pay higher rates to compensate for the risks that Fannie and Freddie are taking on? And, if we recall, those risks were generated initially because the government demanded that banks lend to high risk borrowers – aka Liar Loans. This amounts to a tax on anyone who is purchasing a home.

– Aggie


  1. Buck O'Fama said,

    December 26, 2012 @ 1:32 pm


  2. Buck O'Fama said,

    December 26, 2012 @ 1:40 pm

    Actually, this “unexpectedly” belongs to the later article. As the drunk groom said on his wedding night, “Sorry, after too much partying, I sometimes put things in the wrong place.”

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