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FANNIE MAE AND FREDDIE MAC JJAN.U- AFERBY. 22001188
2. In subsequent years, begin to focus the GSEs primarily on nancing home purchases by eliminating their support for the nancing of cash-out re nance mortgages, the purchase of second homes, and “investor” loans for what will be rental properties. All these mortgages entail increased risks and should be borne by the private sector and not the taxpayers.
ANALYSIS OF FANNIE’S AND FREDDIE’S 2017 BUSINESS
3. Thereafter, we would begin to reduce the standard conforming loan limits, allowing banks, S&Ls and private mortgage securitization to take over increasing portions of the market. The pace with which this can be done is variable, and could eliminate the GSEs from the market entirely over a given period of years.
As the wind-down progresses, larger and larger portions of the housing market will be taken over the private sector—depositories, other whole loan investors, and securitizers of single-family private mortgage backed securities (PMBS). The private system, when it develops, will be largely a prime mortgage system, under which borrowers will bear the costs of risky mortgages.
Little or no change in mortgage rates. There should be no signi cant change in mortgage rates. Research at AEI has shown that for at least the last three years mortgages fully funded by portfolio investors have had lower interest rates than GSE-funded mortgages. This should reduce
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