Freddie Mac and Fannie Mae are effectively government lending agencies that make home loans. Currently limited to mortgages on homes.
The Financial Times published this article:
www.ft.com
So Freddie Mac wants to unleash more money into the economy.
That would be one way to stimulate the economy and very likely unleash even more inflation. Putting aside for a moment concerns of its potential inflationary impact, the Global Financial Crisis was a credit crisis triggered by bad housing loans. Anyone remember the last housing crash that crumbled our entire economy.
Would allowing the government-sponsored entities like Freddie Mac to unleash a flood of new loans risk repeating the sins of the past?
Key takeaways
Pretty much we are
The Financial Times published this article:
The mortgage reform that could unleash the next big US stimulus
Freddie Mac wants to enter the secondary home equity loan market in a win-win for the government, Wall Street and consumers
www.ft.com
"Last month, the government-sponsored mortgage finance agency Freddie Mac filed a proposal with its regulator, the Federal Housing Finance Agency, to enter into the secondary mortgage market, otherwise known as home equity loans"
"could begin to unleash almost $1tn into consumers’ wallets. By the autumn, it could be on its way to $2tn."
"could begin to unleash almost $1tn into consumers’ wallets. By the autumn, it could be on its way to $2tn."
So Freddie Mac wants to unleash more money into the economy.
That would be one way to stimulate the economy and very likely unleash even more inflation. Putting aside for a moment concerns of its potential inflationary impact, the Global Financial Crisis was a credit crisis triggered by bad housing loans. Anyone remember the last housing crash that crumbled our entire economy.
Would allowing the government-sponsored entities like Freddie Mac to unleash a flood of new loans risk repeating the sins of the past?
Key takeaways
- Over 8 million people have experienced untracked equity withdrawals through COVID-19 forbearance programs, where deferred payments were turned into non-interest-bearing liens added on to the back end of their mortgages, surprising homeowners during sales or loan payoffs that they owed more than they realized. This means many current homeowners have less home equity than they think.
- Government-held mortgages have surged post-2008. Today, over 85% of mortgage originations are now government-held, primarily through Fannie Mae, Freddie Mac, and Ginnie Mae, compared to a more significant private market presence before the crisis. We are now a nation of borrowers from the government for our shelter.
- Freddie Mac’s venture into home equity loans could exacerbate homeowner over-leverage and potentially lead to a credit crunch similar to 2008, highlighting risks such as increased delinquencies and foreclosures.
- Allowing the issuance of up to $2 trillion in home equity loans THIS YEAR could be highly inflationary, worsening economic inequality by exacerbating the wealth divide and impacting housing affordability.
- The private lending market lacks transparency, with significant activities going unnoticed until problems appear in bankruptcy filings.
- Current trends point to a growing credit crisis, potentially leading to more underwater borrowers by next year.
Pretty much we are
