this is a must read if you care about your future!!!

The End of 30-Year Fixed Rate Mortgages?


The Treasury Department is looking to wind down Fannie Mae and Freddie Mac, but without these organizations, there would be few buyers for 30-year fixed rate mortgages in the secondary markets. The 30-year mortgage was created during the Great Depression as part of the New Deal to help revitalize the real estate market. Prices have risen in real estate over the decades because this length of time. It has allowed people to leverage their future earnings today bringing forward 30 years of income.

What will happen if Fannie Mae and Freddie Mac are shut down? It is unlikely that the bankers will step in. They are transactional based, not relationship. If they cannot package and resell mortgages, then they will not write 30-year mortgages. Bankers will be glad to offer short-term mortgages with floating rates shifting the risk of interest rates to the American public who is the least capable to handle such a profound change or understand the risks. The net result of this type of change will more likely than not set in motion the second decline of the cycle.

Read the rest here….

About ketchemandfleezem

I like to call tops and bottoms in the market.
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2 Responses to this is a must read if you care about your future!!!

  1. Linda Barga says:

    After reading this article and others related to it, I’m not so sure that I disagree with the objectives of the legislation. FNMA & FMCC have possibly outlived their useful lives, as {unions have}. The “winding down” or ending of any government program is at best – rare. The fact that Obama is in agreement with this, makes one highly suspicious, since I have not agreed with one single issue that he has ever proposed or instated. But I will attempt to make some sense of this. The two companies have grown rife with fraud and corruption, massive out-of-control spending, little or no accountability either. We have become a nation of debtors. Very few people in this country have ever saved enough money to buy a car, or a house or a computer for that matter. They just “charge” it and worry about paying for it later. The credit-worthiness of most home buyers is suspect and down payments are small. These rules have been handed down from our great government planners who have decided that “everyone” deserves a home. So the fact that these loans are risky makes it prudent for the banks to move them over to FNMA & FMCC. I would not want to carry these loans either, unless backed by the full faith and credit of our government. Since these two programs were created during the Great Depression to stimulate the economy, don’t you think that maybe they have outlived their usefulness or purpose?
    My parents moved in with my grandparents and saved enough money to buy their first house. They also saved and paid cash for their cars. They created a lifelong philosophy that made them comfortable and secure. If all of us had to actually put “some skin in the game” when making a major purchase, don’t you think that would stabilize the housing market ? Possibly 50% down payment on a house, and a high FICO score, would make a bank much more willing to extend credit to a homeowner? Yes. Accountability. I don’t think people would walk away from their house or car purchase if they actually had to put a substantial amount into the equation? Wouldn’t this stabilize the prices also, as a side benefit? There would not be the wild swings in prices that we have seen in the last couple of decades?
    But getting back to the real question here…..what would be the political motive of the powers in Washington to make such changes? They are only interested in more government control and power.

    Liked by 2 people

  2. Well put Linda. the purpose is to actually force banks into making the loans on their own


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