Obama wants big changes in mortgages
15.02.2011 00:01
Obama wants big changes in mortgages
By Ben Rooney, staff writerFebruary 11, 2011: 1:22 PM ETNEW YORK (CNNMoney) -- The Obama administration on Friday officially unveiled its plan to remake the mortgage market and reduce the government's role in housing finance by winding down Fannie Mae and Freddie Mac.
The highly anticipated "white paper" outlines steps the administration says will help draw private capital back into the mortgage market, curb unfair lending practices and make federal support for borrowers more targeted.
The plan would phase in changes over a period of years and push back the most dramatic restructuring, which would require congressional approval, until as late as 2018. ()
"We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market," Treasury Secretary Tim Geithner said in a statement.
Fannie and Freddie are government-sponsored enterprises that buy home loans that conform to certain standards and convert them into assets that can be sold to investors. They stand behind the vast majority of mortgages in the United States.
The two institutions, which were publicly traded at one time, were rescued by the government in 2008 as the downturn in the housing market led to staggering losses on bad loans. The two companies have received
Three options for the long haul: The paper lays out three possible long-term solutions for restructuring the mortgage market after Fannie and Freddie are gone. These options will now frame the debate in Congress over how to proceed with more significant reforms.
Under one option, the government would only guarantee mortgages backed by the Federal Housing Administration and other programs for lower- and moderate income borrowers.
The other options also include backing of FHA loans, but propose additional steps to reform government support for the housing market.
One proposal would create a "backstop mechanism" to support the mortgage market during a crisis. The other focuses on providing insurance for mortgage-backed securities.
In a conference call with reporters, Geithner said it could take between five and seven years to wind down Fannie and Freddie and put in place a permanent solution.
Near-term changes: Meanwhile, the paper also outlines a number of steps the government can take now to begin overhauling the way Americans borrow money to buy a home.
The plan recommends requiring Fannie Mae and Freddie Mac to price their loan guarantees to the same standards as private banks.
It also says Congress should allow a temporary increase in those firms' conforming loan limits to expire. Currently, Fannie and Freddie are allowed to buy loans worth up to $729,000. If the increase expires on schedule in October, the limit would fall to $625,500.
In addition, the plan calls for gradually increasing down payments for loans backed by Fannie and Freddie and shrinking their loan portfolios.
The administration is also seeking to raise federal insurance premiums on mortgages. , which will be submitted to Congress on Monday, will include a proposal to raise federal insurance premium on FHA loans by 0.25%.
Critics argue that such steps will raise borrowing costs for homeowners and shock the housing market. But the administration maintains that gradual implementation of reforms will not disrupt the economy.
"We have to do this carefully and responsibly," said Shaun Donovan, secretary of Housing and Urban Development.
The paper also details steps to protect consumers from unfair mortgage practices and ensure that federal aid for low-income borrowers is more effective.
First Published: February 11, 2011: 9:04 AM ETRight Now
Sponsored by: President proposes his 2012 budget: Deep cuts will help slow deficits in the next 10 years but the plan fails to address long-term problems. Jacob Lew, director of the U.S. Office of Management and Budget, says 'we have to make tough tradeoffs' in the president's budget. President Obama's new budget would eliminate or reduce funding to a total of 200 government programs for savings of $33 billion in 2012 alone.
by
President of the ING Foundation says it is important to share who you are and what you value for a great business career. Hewlett-Packard unveils its upcoming webOS tablets and says the software will soon run on its PCs as well. Want to float 80 feet in the air as you dine with 22 of your closest friends this Valentine's Day? Dinner in the Sky can make it happen.
| Markets | Last | Change | % Change |
|---|---|---|---|
| 12,267.51 | -5.75 | -0.05% | |
| 2,817.18 | 7.74 | 0.28% | |
| 1,332.23 | 3.08 | 0.23% | |
| 3.61 | -0.03 | -0.88% | |
| 1.35 | -0.01 | -0.54% |
| Company | Price | Change | % Change |
|---|---|---|---|
| 4.90 | 0.02 | 0.41% | |
| 18.82 | 0.12 | 0.64% | |
| 14.93 | 0.16 | 1.08% | |
| 16.07 | -0.31 | -1.88% | |
| 11.64 | 0.31 | 2.77% |
Sections
Dick Costolo, Twitter's CEO, said that the service is providing a social framework around TV that can save advertisers' business models. | President Obama's budget proposal -- generating $39 trillion in revenue through 2021 -- would boost taxes for the nation's wealthiest families, for big banks, and for the coal, oil and gas sectors. | Dick Costolo, Twitter's CEO, said that the service is providing a social framework around TV that can save advertisers' business models. | The Small Business Administration will be flying without any additional stimulus appropriations in 2012. Compared to 2010, the proposed budget would be a 45% cut. | When it comes to celebrating Valentines Day, residents of Phoenix are spending the most on roses, heart-shaped boxes of candy and, yes, lingerie. |
Please create a screen name to access this feature.
Screen name (Select one with 3-12 characters; Numbers and letters only)
Forgot password
Enter your e-mail address below and we will send you an e-mail with a link and code to reset your password.
Password selection
Reset code
New password
Log in & let's get started!
Password
Remember me for two weeksNot a member yet?
Sign up or
Screen name
Select one with 3-12 characters;Numbers and letters only
You will receive an e-mail to validate your account
Password
Make it 6-10 characters, no spacesType what you see in the grey box
If you can't read this,Yes, I would like to receive occasional CNNMoney member updates about new features and special offers.
CNNMoney will use the information you submit in a manner consistent with our . By clicking on "sign up" you agree with and and consent to the collection, storage and use of this information in the U.S. subject to U.S. laws and regulations. ()
For our international users, please be aware that the information you submit when registering for our services is collected in the United States of America. In addition to being subject to our Privacy Policy, the collection, storage, and use of your data will be subject to U.S. laws and regulations, which may be different from the laws and regulations of your home country. By registering for this service, you are consenting to this collection, storage, and use.
We're Sorry!
This service is temporarily unavailable. Please try again soon.
Thanks!
Please check your e-mail and click the link to confirm your membership. Then, you'll be ready to participate in all activities and conversations on our site.
Add comment