Closing Down Fannie Mae and Freddie Mac Could Increase Mortgage Rates

Home buyers will feel the burden of increase in mortgage rates once the Congress shuts down both Fannie Mae and Freddie Mac, the government-controlled mortgage guarantee giants that were rescued by a $187 billion taxpayer bailout during the financial crisis. (Source:http://realtormag.realtor.org/)

The House Financial Services Committee passed a bill called the PATH (Protecting America's Taxpayers and Homeowners) Act which would mean phasing out the two mortgage giants - Fannie Mae and Freddie Mac. On the other hand, the Senate's bipartisan plan would also phase out Fannie and Freddie but, unlike in the House, the federal government would remain as an insurer of last resort. In the House bill, there is no plan to get the federal government involved in mortgage financing except through a much-modified FHA. (Source:http://realtormag.realtor.org/)

Both proposed bills would phase out the two mortgage giants in a 5-year time frame, limit the government's intervention into "just" guaranteeing mortgage securities and at the same time transfer the mortgage financial risks from the government to the private sector - this will prevent the use of taxpayer's money for future bailouts again. Once the Congress shuts down Fannie Mae and Freddie Mac, borrowers will be paying a slightly higher mortgage rates.

According to Mark Zandi, chief economist at Moody's Analytics, on a $200,000 loan with 20% down payment, typical borrowers could pay about $75 extra per month in interest payments in the Senate's bipartisan plan. While borrowers could pay $135 more under the House plan. Adding up all the extra monthly payments all through out the life of the loan could sum up to a significant amount for the borrowers.

If you have questions, please feel free to contact me. I will gladly assist you in achieving your dream of owning your new home at the least possible cost for you!