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Posts Tagged ‘freddie mac’

The Housing Bill has passed in the Senate with some Republicans grousing that it is an unfair bailout at the taxpayer’s expense.

Some highlights:

Increase the Federal Housing Administration’s role.

Establish a stronger regulator for the GSEs.

Permanently increase “conforming loan” limits.

Create home-buyer credit.

Bar down-payment assistance for FHA loans.

Create an affordable housing trust fund. Give grants to states to buy foreclosed properties.

Bolster Fannie and Freddie
All of these moves are good moves. We need a stronger and more vital FHA; the FHA rotting on the shelf is precisely what created the vacuum filled by the sub prime niche. The aid to Fannie Mae and Freddie Mac are controversial, but I support them. I am a free market guy, but the government has to act in some cases, and this is one of them. Unlike the S & L scandals and subsequent bailouts in the late 80’s, aid to F & F is not rewarding bad lending. As a matter of fact, if more people went conventional, the magnitude of the problem would be diminished. Fannie and Freddie sustained collateral damage from sub prime; they were not part of it. We all should remember that.

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Uncle Sam is stepping in to¬†aid Fannie Mae and Freddie Mac. One might question the wisdom of government bailing out mortgage companies. In this case, I don’t. Fannie and Freddie are part of the solution, not part of the problem. By definition, they were not sub prime lenders. They just bore the brunt of problems borne of the sub prime meltdown.

Should the government help irresponsible banks that fueled the economic crisis by making reckless loans? Never. Should they take steps to shore up the institutions that are the standard bearer of responsible lending? You bet they should. It is the system working. The Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association, as Freddie and Fannie are less commonly known, are implicitly backed by the Fed. Now the Fed must act.

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