Let’s not privatize Freddie and Fannie
By Dian Vujovich
I’m not sure why President Obama is hot on the U.S. government getting out of the mortgage-finance business. Yah sure we had to bail out Freddie and Fannie with billions in 2008 but a good portion of those monies have already been paid back: Of the $188 billion, $146 billon has already been returned. And as the real estate market continues to improve, the entire amount will not doubt be returned. From where I sit, loans repaid are always a good thing unless, I guess, if your in politics. There, the handling of money doesn’t seem to make sense or carry the same weight as it does in the non-political world.
As much of a fan of the government providing programs for our safety and to protect the needs of the less fortunate —like those to help those with low incomes, the hungry, children, the ill, our Vets, the elderly, etc.— I’m also equally a fan of free enterprise and private business.
Bottom line it all though, and you and I both know a couple of things: One, there is not only one right way of doing anything; two, that private business’ and government related ones both have more than their share of crooks; and three, that real estate is a very precious commodity.
That last point brings me to Freddie and Fannie.
Home ownership is what keeps America and American’s humming. Being able to buy a property, and one day perhaps eventually own outright, is at the foundation of our democracy. Take away that opportunity or limit the availability of the right to purchase a home, in addition to erasing a dream you muck up an individual’s sense of self, rights of ownership and independence.
Decide to turn America into a country where only a few can afford to own their home and the rest left to rent from a landlord and you’ve got a Downton Abbey situation where the manor home belongs to the wealthy and all of the smaller homes surrounding it house occupied by renters. The notion might appeal to a few but not the masses and less financially fortunate.
It’s no secret that since The Great Recession and the mortgage meltdown, it has been a buyers market for investors and those with cash. It’s also no secret that at the same time it has become tougher and tougher for the working guy and gal to purchase a home. Not only does qualifying for a loan require a higher—and often stellar—credit rating, today the down payment to purchase a home is higher, too.
It is expected that privatizing Freddie and Fannie will lead to higher mortgage costs for buyers. According to one source, privatizing mortgages could mean that on a $200,000 mortgage the monthly mortgage payment would increase about 75 bucks to a homebuyer. That’s almost $1000 a year. At a time when salaries haven’t kept up with inflation and the rising cost of living for the past two if not three decades, expecting more from the little guy— who needs more money to live today than ever before and has to save for a longer life than ever in our history— is not only cruel but almost criminal.
I think it’s great that the prices of homes in Palm Beach are through the roof and selling like hotcakes and that those off-island as well as throughout the county are rising and selling too. But what’s not great is when average and working individuals who don’t have millions at their disposal, can’t qualify for a loan because of their incomes, have credit ratings that might be average and who don’t have hefty deposits to put down are not able to purchase properties.
For all of the problems within Freddie and Fannie, they agencies have shown that they pay back their debts. So instead of privatization, I’m thinking keeping them is a ”Better the devil you know than the devil you don’t know” kind of situation.
BTW, Freddie and Fannie both trade on the stock exchange. Freddie, short for the Federal Home Loan Mortgage Corporation (FMCC) closed today at $1.40 a share. During the past 52 weeks the stock has traded as high as $5 a share and as low as 14 cents. Fannie Mae, the Federal National Mortgage Association (FNMA) closed at $1.55 a share today and during that same time frame has traded as high as$5.44 per share and as low as 9 cents.
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