Community bankers and mortgage lenders across the country are viewing with skepticism President Obama's call to do away with government-backed mortgage giants Fannie Mae and Freddie Mac, as the president unveiled his latest housing plan during a speech in Phoenix.
The president, after touring a construction site in Arizona, endorsed the call by many in Congress to phase out Fannie and Freddie, while still calling for 30-year mortgages to be available to borrowers. The government-backed mortgage giants were caught in the housing crisis which ended in a $187 billion taxpayer bailout.
The idea is to have the private sector play a bigger role in guaranteeing loans.
"For too long, these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag," Obama said of Fannie and Freddie. "Private capital should take a bigger role in the mortgage market -- I know that sounds confusing to folks who call me a socialist."
But some lenders worry that the still-fragile U.S. housing industry is not ready for such a change.
“Removing them entirely would be devastating,” Kelly Powers, vice president for advocacy at the Arizona Mortgage Lenders Association, told FoxNews.com.
Powers argues that there isn’t enough private capital to step in and take over, and the results on lending could be damaging.
“It would make it much more difficult for people to borrow,” she said. “There would be less liquidity and less players in the game. The requirements would go up and people won’t be able to qualify for loans.”
Via: Fox News
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