PPI In the News

Are Fixed-Rate Government-Backed Mortgages Over?

In an article for The Fiscal Times, National Correspondent Josh Boak quotes PPI’s senior fellow Jason Gold:

Congress has restarted its slog about the fate of Fannie Mae and Freddie Mac – and at stake could be the future of your standard issue 30-year fixed-rate mortgage.

The two mortgage giants became wards of the state in 2008, when the housing bust brought them to their knees and a government conservatorship kept the entire industry afloat.

“Government Sponsored Enterprises” – the bureaucratic name for Fannie and Freddie Mac – currently account for 75 percent of all mortgages that get bundled into securities. Between them, Fannie and Freddie control a portfolio of 31 million mortgages worth a combined $5 trillion.

No public official disputes the need for the government to play a smaller role in the housing market. But the basic disagreement is whether the government should still guarantee the principal and interest on your mortgages. Supporters say the guarantees make financing affordable, while opponents say it inflates prices and puts taxpayers on the hook.

“The GSEs’ existence is essential to a housing finance market Americans want, not need,” said Jason Gold, a senior fellow at the Progressive Policy Institute. “Fixed rate loans are the foundation on which the entire system is built. The necessary ingredients for fixed loans on a widespread affordable basis are securitization and a government guarantee. There are only two significant places that combination runs through – GSEs and the Federal Housing Administration.”

Read the entire article here.