Here’s the skinny on Fannie. Fannie Mae and Freddie Mac have been the lead financial stories since the housing collapse in 2008. These GSE, Government Sponsored Enterprises, are private companies that have the full backing of the Federal Government, whose full purpose is to keep money flowing in the housing market.. On the brink of insolvency, the Feds pour millions of US Tax payers’ money into these companies to keep them from going under. To date, the amount of dollars spent is close to 170 million, with about 37% of that having been paid back to the US Gov in the form of treasury dividends.
Here’s some good news, the economy is starting to take off and the housing market is leading the charge. As a result, FNMA and Freddie Mac are starting to make money. Because of their new found profitability, the Federal government has taken steps to speed up repayment of their debt to the tax payers. Before, FNMA/Freddie were only required to pay back 10% in the form Treasury dividends. They were obligated to make that 10% repayment even if they had an income loss. A loss would require them to borrow from the Treasury to pay the Treasury dividend payment. In the mortgage business we call this negative amortization; in home finances, we call this robbing Peter to pay Paul.
Now there is a much better plan. Since FNMA/Freddie are returning to profitability, the government is requiring that all profits be swept to the repayment of the outstanding debt. If there are no profits, no payment will be required. However, it is fully expected that their profits will continue to rise due to the simple fact that FNMA/Freddie/FHA finance 9 out of every 10 homes. That means that 90% of all home loans are still financed, basically, by the Federal Government.
Which lead us to another point.
There has been a lot of talk about dissolving FNMA/Freddie but until someone figures out how to reduce the government’s financing of 90% of the housing market, FNMA/Freddie will be the main player in supplying the market with liquidity. “I can see FNMA and Freddie Mac merging, perhaps, but I can not see them being totally eliminated, at least not in the near term.” Jesse A Lehn, Executive Vice President, Operations, Mortgage Investors Group.
Here’s the bottom line: the housing market is strong and there is plenty of money to lend.
Mortgage Investors Group understands there are a lot of choices when it comes to financing the purchase of a new home or refinancing an existing one. Our licensed and experienced loan officers are here to help you gain a better understanding of those options and answer your questions about the loan process, qualifying and the different features of each loan program. We offer everything from conventional mortgages to government loans.
Call us today and take advantage of these incredible market conditions!