Friday, November 5, 2010

Should we privatize the mortgage market?

About 90% of today's $14 Trillion in mortgage loans are controlled by the Federal Housing Authority (FHA), Department of Veterans Affairs, Fannie Mae or Freddie Mac. That's alot of risk concentrated on one source - the US taxpayers!

Even though the private market couldn't compete with government guarantees, or offer loans without a prepayment penalty, we certainly don't want to leave the taxpayer on the hook.

One step toward privatization suggested was to reduce the maximum amount of mortgage loan by $75,000 on a periodic basis which eventually would force more people out of the government loan and into a private loan.

Full disclosures - consumer protections - and reducing taxpayer exposure are goals.

Recourse -The right to seize the home owner's other personal assets, in addition to the real property, in payment of the loan. Proposals include using recourse to drive rates lower if borrower is willing to accept more risk to give up their personal assets

Note: Government National Mortgage Association - Ginnie Mae - securitizes the FHA loans now.

Source: For some information was WSJ 10-25-2010, A17

Also, if you want to watch a good summary of securitization analysis - here's a Cspan video library segment - but grab a pot of coffee - http://www.c-spanvideo.org/program/296226-1

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

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