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Tuesday, August 17, 2010

Is Government becoming a mortgage house?

With the nationalization of Fannie Mae and Freddie Mac and more than $148 billion being pumped into bailing them out, the question of whether the Government should continue its big stake in the housing market has been raised. Fannie and Freddie are projected to continue to take on more and more mortgages that will default and will need additional money to bail them out. The cap of 400 Billion for bailing out Fannie and Freddie has been lifted (the skies the limit). Proponents of Government backing of the housing market say that if we were to give it back to the private sector interest rates would soar (Mainly due to risk).  The one thing we have to remember though, the government backstopping of these mortgages and their failures fall on our bill.  Even though the check has been delayed from coming due (because of elections and such) doesn't mean it won't.  That bill has to be paid and each mortgage that gets financed, backed and fails is going to get paid by each and every one of us.  We are not doing ourselves any favors trying to prop up a market that gets heavier and heavier every day.  [ Read more... ]

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