Mortgage California Blog

Life Without Fannie and Freddie?

March 23rd, 2011

What would happen if loan giants Freddie Mac and Fannie Mae were shut down? A recent New York Times article explains that if the government eventually shuts down these companies, the 30-year fixed-rate mortgage loan could be a thing of the past.

Homeownership as we know it could change drastically, with the fixed-rate loans at risk for extra fees and high rate increases for those in urban and rural areas.

“Lenders could charge fees for popular features now taken for granted, like the ability to “lock in” an interest rate weeks or months before taking out a loan,” according to the article.

Fannie Mae and Freddie Mac carry 90% of new mortgage loans post-recession as many lenders can’t afford to make loans that aren’t government insured. The 30-year loan has been the popular option since it was introduced in 1954 by an act of Congress, and most have been issued only with government support.

Read more about the possible outcome of Fannie Mae and Freddie Mac being shut down and what would mean for mortgage rates here.

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