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Proposed Unified Platform May Replace Freddie Mac and Fannie Mae

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Freddie Mac & Fanny Mae


Freddie Mac and Fanny Mae – beware!

As I am sure you know, the real estate market has been slumping for over 3 years as of the time of this writing, and there are no strong indicators that this slump will turn around anytime soon.  Although the market for rental properties has not been as flat as the broader market for primary homes, there has still been a negative impact mainly because lending standards are so incredibly tight at the moment. The combination of sky high supply (forclosure properties) and reduced demand (tight lending standards and the poor economy in general) has eroded property prices and has directly led to the housing crisis that we currently find ourselves in.

In the wake of this housing crisis, an investigation into the current financing systems and prevailing policies was bound to occur. While there are several factors related to the housing market that reveal weakness under the burden of prevailing market woe, mortgage policies have been a recurring theme in this housing bust saga.

Large scale changes in the mortgage sector have been expected for some time now, but the FHFA has surprised the market by proposing steps that might well see the end of venerable institutions Freddie Mac and Fanny Mae. The federal agency, which regulates both these institutions, has put forward plans for building a single mortgage-backed securities system.  This does not bode well for the future of the mortgage giants.

Freddie Mac and Fannie Mae were competitive institutions functioning in the mortgage space independently until they were brought under central government control in 2008. Since then, they have collaborated on several housing market projects and brought relief to owners of distressed properties. Their performance during the current housing crisis, however, has made many market players question their operational fidelity and effectiveness.

Click to read more about the future implications for Freddie Mac and Fannie Mae.

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