Obama seeks to phase out Freddie and Fannie

.
2/11/11, "Fannie Mae and Freddie Mac could be wound down," BBC

"The Obama administration has proposed an overhaul of the US mortgage market that would

• limit the government's role in supporting home ownership.

Under the proposals, the state-backed mortgage guarantee giants Fannie Mae and Freddie Mac would be wound down.

• The two firms have received almost $150bn in taxpayers' support since the US housing market collapsed....

The administration has laid out three options:

• to only guarantee mortgages to poorer borrowers;
  
• support the mortgage market only in times of stress; or
  
• to guarantee mortgage investments created by private companies.

The government currently owns or guarantees more than 90% of US mortgages....

The proposals also include increasing the mortgage insurance premium charged by the Federal Housing Administration, which generally

• offers lower rates and affordable down payments to home buyers.

Analysts believe the current system helps to keep a cap on mortgage interest rates, and that any change is likely to lead to a rise....

• So, one casualty of any change is likely to be the popular 30-year fixed rate mortgage.

Mr Geithner told the CNBC television channel: "We are going to make sure we move very carefully so we don't impede the process of repair in the housing market."

But he added: "We can't wait too long. It's important Congress legislates some time over

• the next two years."...

Democrats and consumer groups have said they feared mortgage rates would soar if the housing finance system were left mainly to the private market, and that fewer people could afford traditional 30-year, fixed-rate mortgages....

"Compared to the way things operated in the past, credit would be a little less easy to obtain, and the terms would be a

• little less attractive," said Nigel Gault, chief US economist with IHS Global Insight.

He added one benefit to this was that housing would be less of an attractive investment - meaning people may be

• more likely to rent homes, while banks would be more wary over lending.

But Mr Gault said that removing such buyers from the market may cause home prices to fall - helping first-time buyers

• but hurting homeowners."

.