Reality Behind Mortgage Refinance

Its possible to say Fannie Mae and Freddie Mac was so miss-managed underestimated. Conservative estimates put the security of the Government Sponsored Enterprises (ESA) with a minimum of $ 380,000,000,000. He issued a white paper covering the Department of Finance Department of the reform on the two mortgage finance giants Ratchet up the volume on their final deposition. Debate centers on privatization of the home mortgage system, or to maintain some control of the state equation. Change will come, as soon as the claims require careful consideration.

The Finance Project

Reform report not issued by the Government doing to some extent Obama reform, which the Administration intends to work with the Congress at the end. Here are some key features of that report, the government recommends as a starting point to go ahead with the reforms:

• Reduce the GSEs portfolio of ten percent per year. 
• Increased costs incurred to ensure that mortgage securities.
• Gradually, the mortgage down requirements increase 10%.
• Lowering of mortgage loans that GSEs may buy up to a maximum of $ 625,000. 
• Increase the Federal Housing Administration (FHA) mortgage insurance costs.
• Administration explained the three options for reform of Fannie and Freddie long. The first one, developed in a system totally private home mortgages.
• Many moved to the private mortgage market, but the government guarantees and interventions limited mortgage during the housing crisis. Secondly, Uncle Sam will continue to provide home loans through FHA, VA and the Department of Agriculture. 

Arguments for privatization 

Dwight M. Jaffee, banking, finance and property at the University of California, Berkeley, believes the privatization spare taxpayers from having their mortgage system bailout in the future. In addition, home buyers will benefit from the expanded set of products and terms, such as type of mortgage, maturity, and prepayment options. Homeowners to bring more to the table - a higher down payment, a prepaid option, a higher credit score - get a lower interest rate. Conversely, lack of home buyers - low value will prepaid credit options, and pay a lower interest rate loans face higher.

Professor Jaffee shows the European countries as well, like Denmark to give low interest mortgages with fixed interest rates with longer maturities, without the need for government involvement in the mortgage market. Some argue that privatization will lead to big banks pushing smaller lenders have come out of the home mortgage business. Respond to the complaints involve making credit cooperatives, which allow smaller parties to combine their funds and mortgage lenders compete with larger ones.

Why Community Involvement is needed 

The middle-class home buyers only group on the benefits of government-backed loans in the financial system as a key housing wheel. Variety of other tribes who works in the housing sector will depend on the home life of the mortgage industry that home ownership with the greatest number. advocacy is creating dynamic markets for their products and services. Home building, Realtors, mortgage brokers, construction workers, community banks, home improvement contractors, furniture makers, and device makers who make their living from the industry.

Do not forget the role, say some of the crime, the private investment banking companies like Goldman Sachs, JP Morgan, and Merrill Lynch. Private bankers perceive risk loans and bundled them into the subprime mortgage securities. Credit rating agencies - Standard & Poor 's, Moody's and Fitch -. "Junk" rating under the standards Collateralized Default Obligations (CDOs) as an AAA when they

You know the story. This effect becomes worthless. Many individual investors, Fannie and Freddie are a risky investment now. Moreover, let us not forget the insult added to injury - the same investment bankers who saw "the opportunity" to make a profit by selling securities cdos also make billions by betting that the bottom will fall out of the CDO market .

Ask the question: Can we trust private industry to undertake home mortgage finance system, including the secondary market, where questions about the lack of ethics on the part of the private mortgage industry players to grow? Investment banker stated repeatedly before the Congress, they act ethically, even when putting their financial interests ahead of their customers and the economy.

Fix Economy 

Fannie and Freddie to make more Americans qualify for home loans, credit to encourage home ownership. Currently included Fannie, Freddie, or FHA loan for almost every new activity. Typically, private mortgage lenders to provide at least 20 percent of the mortgage without government guarantees. Historically, housing function as a central element in promoting economic recovery begins with the Great Depression.

However, we live in different times. We no longer strong base of manufacturing, home building, and other good jobs that allow customers to pay for a home owner or ownership to keep their homes. States that 23.1 percent Corelogic or about 11.1 million households have mortgages under water on December 31, 2010. Meanwhile, the bank carried out by one billion to strengthen the balance sheet, the purchase of failed banks, and pay the bonus question.