Buyers may feel the pinch, if Congress passes the following plans to close Fannie Mae (Fannie Mae) and Freddie (Freddie Mac), the government-controlled mortgage-backed giants during the financial crisis was rescued by a $ 18.7 billion U.S. dollars in taxpayer bailouts .
Borrower may end up paying higher mortgage rates according to the House of Representatives and the Senate bill would gradually Fannie Mae and Freddie Mac more than five years, shrinking the government's huge role in ensuring that mortgage-backed securities. Fannie Mae and Freddie Mac crumbling crush on risky mortgages under huge losses before being released on bail.
House GOP bill would actually mortgage market privatized. The bipartisan Senate plan envisages a continuous, but more limited role of the government in the insured mortgage securities. Supporters said it would continue to receive and affordable mortgages.
Congress to overhaul the nation's mortgage finance system change efforts got a boost on Tuesday, generally with bipartisan Senate plan from President Obama's call.
"For a long time, these companies are allowed to buy mortgage to make huge profits, knowing their bets, and if broken, the taxpayers will be left holding the bag, which is the head, we win, tails you lose", which is wrong it, "Obama said." The good news is, there is now a bipartisan group work end Fannie Mae and Freddie Mac, because we know their senators, I support these reform efforts. "
The idea behind these two programs is to put more mortgage financing risks, from government to the private sector, in order to prevent future taxpayer bailouts. But there are also buyers are likely to make private investors to take more risks, protect taxpayers pay the price.
"This will mean higher mortgage rates," Moody's Analytics chief economist Mark Zandi (Mark Zandi) said. "Now the question is how much higher."
The typical borrower is able to pay additional interest payments of about $ 75 a month, about half a percentage point, the average mortgage based on the recommendations of the Senate, Zandi estimated that about 135 under the House plan. And the borrower provides a down payment of 20%, which is a line with loans of approximately $ 200,000.
"You have to assume that almost any model for the future is being drafted, the loan will be more expensive," the Mortgage Bankers Association and former Obama administration housing official CEO David Stevens said.
Most Democrats tend to support continued government role in the mortgage market, as they say, stabilize the housing market. Many House Republicans, especially conservatives, wants to end government involvement and let the free market rules. Given division rival bills stood as an open-label long-term battle.
"We all agreed, saying:" The system and Fannie Mae (Fannie Mae) and Freddie need to be changed, Massachusetts Rep. Michael Capuano, ranking Democrat on the House Financial Services subcommittee on housing and insurance. "The real problem is that we reform the way or the House Republicans want to kill it."
Rep. Maxine Waters, D-California, ranking Democrat Financial Services Committee, said that the vast majority of housing industry groups, such as real estate agents, mortgage banks and homebuilders support for maintaining the government's role to ensure that the mortgage-backed securities.
House Republicans on the House Financial Services Committee, Rep. Jeb · Hensarling, R Texas, under the leadership of the President, said that their bill in the mortgage finance system, greatly reducing government involvement, will be a boon to consumers, stimulate competition and innovation in the private sector and give borrowers more choices. They accuse Fannie Mae and Freddie Mac before the collapse of housing, expansion of the market boom - bust cycle.
Hensarling, said in a statement Tuesday that he plans "to private capital in the housing finance system in the center of the end of the Fannie Mae (Fannie Mae) and Freddie (Freddie Mac) bailout, and maintain a 30-year fixed-rate mortgages - all targets president said today that he supports. "
Hensarling bill recently cleared without any democratic vote, his committee, and is expected in the coming months to get the House vote.
Housing advocates warned that if the government's role scaled back too far, mortgage credit score can be pushed out of the reach of people lower down payment less savings.
They said 30-year fixed-rate mortgages, long-staple housing market, may become hard to find, more expensive low-income borrowers, since lenders will in the absence of government guarantees in the case, is not willing to provide this long-term loans.
"Those people are now going to be locked, system, or will end up paying a premium because of these changes," National Community Reinvestment Coalition, housing advocacy group, chief executive John Taylor said.
Fannie Mae and Freddie Mac owned or guaranteed nearly half of the U.S. mortgage and the new 90%. They buy mortgages from lenders, packaged as bonds, to ensure their breach, and sold to investors. This can help banks get rid of the risk of its balance sheet, freeing more money to lend.
During the financial crisis, housing prices tumbled and foreclosures surge in government bailout of Fannie Mae and Freddie Mac, the default risk of flooding from lending institutions to ensure that many lower income borrowers for providing affordable housing.
Like many banks, the two companies have relaxed their lending standards, they bought a boom or guarantees. High-interest loans, some low "teaser" interest rate risk borrowers, were given.
Now, under the control of the government, Fannie Mae and Freddie Mac are lucrative, largely thanks to their housing recovery pumping billions of dollars into the U.S. Treasury. Fannie Mae and Freddie Mac, the Treasury paid $ 13.2 billion, more than two thirds of the bailout.
In the Democratic-controlled Senate, the bipartisan bill, R-Tennessee Senator Bob Corker and Mark Warner, D-VA, will gradually replace Fannie Mae and Freddie Mac more than five years, the role of a new agency relatively limited, the insured mortgage-backed securities from catastrophic losses.
The bill would create a new federal Mortgage Insurance Company will provide backstop insurance, only after a lot of private capital is used. Investors will pay the cost of the insurance company, but agreed to a number of risks its own capital.
The bill in the Republican-controlled House of Representatives virtually eliminates the government's role in the mortgage finance system. This will limit the FHA insurance is only for the first time and lower-income borrowers.
 



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