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Trump's home loan plan accumulates fears of higher mortgage prices for potential homebuyers



Housing supporters of scary scenes like these will be harder to come by if Trump plans to revamp the housing market by making changes to Fannie Mae and Freddie Mac becomes a reality.
Photo: iStock

Homeowners fear the Trump administration will repay federal mortgagees Fannie Mae and Freddie Mac the private sector will increase the cost of home loans and make it difficult to buy low-income and low-income communities disadvantaged.

Fanny May and Freddie Mack are government-controlled companies that help secure money for the US housing market by buying home mortgages and packing packages of these loans for sale to investors. In combination, the two companies return nearly half of the nation's mortgage market at $ 11 trillion, according to the New York Times.

The two publicly traded privately held companies were conserved and put under state control by the Bush administration in 2008. The financial crisis, following an abundance of mortgage loans that have collapsed, also swept the US economy.

This required saving the government at a cost of about $ 200 billion. In 2008, Fanny May and Freddie Mack had to send their profits to the US Treasury, adding a tidy amount to the government treasury.

The Trump administration now proposes, in a 49-point proposal, to have Fanny May and Freddie Mack remain independent again, thus limiting the federal government's role in obtaining mortgages. The plan also calls for additional private competition to be allowed in the mortgage market, The Times explains.

This way, administration officials say, "mortgage rates will be reduced. Officials say it would encourage affordable housing and protect taxpayers from releasing Fanny and Freddie in the event of another housing disaster, "The Times reported.

But proponents of consumer protection and fair housing say the return of Fannie Mae and Freddie Mac to the private sector will give Wall Street too much control over the prospects of buying housing on Main Street residents.

"For working-class Americans who want to buy a house, it could make it much harder to get a mortgage and make the mortgage much more expensive," said Mike Calhoun, president of the Center for Responsible Nonprofit Lending target, in front of NPR.

Calhoun expressed concern that privatization could allow the Trump administration "to impose new rules on homebuyers that would be too stringent, such as requiring higher down payments to obtain a government mortgage," according to NPR.

an example of just such a change is one that would specifically affect housing efforts in cities like New York that have rental control laws.

As the Times explains, the administration wants

[overhaul] affordable housing federal requirements and [set] restrictions that could discourage [Fannie Mae and Freddie Mac] investing so heavily in home mortgages in areas like New York adopted rent-control laws. The administration says such laws impede housing development, and the report calls on regulators to review Fanny and Freddie's standards for multi-family housing loans in rent-controlled areas, saying "limited government subsidies should not be used to offset the adverse effects of these laws. "

Nikitra Bailey, Executive Vice President of the Center for Responsible Lending, told The Times that Trump's plan could increase mortgage rates for" all borrowers ": those in rural areas, low- and moderate-income people, as well as communities of color that are already finding it difficult to find affordable homes.

"The administration says it is trying to save taxpayers from the risk of another catastrophic crash, but it is essentially turning the system into Wall Street," Bailey said.

In fact, as the Times points out:

Privatization can also lead to hedge funds and other investors who bought Fannie Mae and Freddi e Mac shares after the crisis [financial] for hundreds, then pressed the administration to accelerate process.

But even Wall Street didn't seem as impressed with Trump's plan, which was unclear as to the details of how the two companies get the money they'll need to make it private.

As reported by Barron, the shares of both Fannie and Freddie fell by 14 percent and 12 percent, respectively, on Friday.


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