Trying to Understand the Government's Role in Housing
February 15, 2011
There is much focus currently on the 2011-2012 federal government budget. Reams of budget information have been published. It is somewhat mind boggling to believe that anyone person will be able to understand what is proposed, let alone even read it in its entirety. I fee certain that buried in the data will be line items referencing, the Federal Housing Authority (FHA), the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). Fannie and Freddie were placed into conservatorship in September 2008. After a long history, FNMA,1938, and FHLMC, 1971, these government sponsored entities (GSE) fell victim to the housing market crash.
The White House has put forth three options which would shrink the governments role in supporting homeownership by means of guaranteeing the bulk of new mortgages. It will be interesting to read and listen to the debate about the effects each of the proposed options might have on the ability of prospective home buyers to obtain financing.
The government's role in purchasing loans from the banks allowed money to continue to flow into the economy. As long as folks made their payments, the GSE or the investor did just fine. When folks ceased to make payments, the losses began to multiply. So complex did this secondary market become, it will probably take a number of years to sort it all out. Knowing what went wrong, would be a helpful first step in knowing how to continue or not continue government's role in housing.
There is much focus currently on the 2011-2012 federal government budget. Reams of budget information have been published. It is somewhat mind boggling to believe that anyone person will be able to understand what is proposed, let alone even read it in its entirety. I fee certain that buried in the data will be line items referencing, the Federal Housing Authority (FHA), the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). Fannie and Freddie were placed into conservatorship in September 2008. After a long history, FNMA,1938, and FHLMC, 1971, these government sponsored entities (GSE) fell victim to the housing market crash.
The White House has put forth three options which would shrink the governments role in supporting homeownership by means of guaranteeing the bulk of new mortgages. It will be interesting to read and listen to the debate about the effects each of the proposed options might have on the ability of prospective home buyers to obtain financing.
The government's role in purchasing loans from the banks allowed money to continue to flow into the economy. As long as folks made their payments, the GSE or the investor did just fine. When folks ceased to make payments, the losses began to multiply. So complex did this secondary market become, it will probably take a number of years to sort it all out. Knowing what went wrong, would be a helpful first step in knowing how to continue or not continue government's role in housing.
posted by shirley harry at 8:10 AM
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