Without Loan Giants, 30-Year Mortgage May Fade Away

Housing experts say that if the federal government shuts down 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, the New York Times reported today. 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.

In related news, a New York Times editorial today said that Republican proposals for the government to get out of the antiforeclosure business could result in hundreds of thousands of additional foreclosures and steeper price declines. House Republicans have introduced bills to eliminate four federal antiforeclosure programs and replace them with nothing, according to the editorial. There is no dispute, according to the editorial that HAMP, the Obama administration?s main antiforeclosure plan, is lagging behind its goal to modify troubled loans for three million to four million homeowners. Of the $30 billion intended for the effort, only $1 billion has been spent so far to permanently modify 608,000 loans. The editorial said that much of the problem lies with the participating banks. Legislation and regulation that gets tougher on the banks could help fix those problems, including enactment of a transparent process for homeowners to challenge banks' decisions, stiffer penalties for banks that do not meet HAMP standards and a streamlined process for converting trial modifications to permanent ones


http://www.nytimes.com/2011/03/04/opinion/04fri1.html


http://www.nytimes.com/2011/03/04/business/04housing.html