Tags: Government | Bigger | Role | Mortgages

Government Grabbing Bigger Role in Mortgages

Thursday, 13 May 2010 09:36 AM

The U.S. government's massive share of the nation's mortgage market grew even larger during the first quarter, driven by a jump in the share of loans backed by government-owned housing-finance giants Fannie Mae and Freddie Mac.

Government-related entities backed 96.5 percent of all home loans during the first quarter, up from 90 percent in 2009, according to Inside Mortgage Finance.

"Fannie and Freddie have to get smaller and less relevant in order to revamp them, and instead, every day they're getting bigger and bigger and bigger," Paul Bossidy, CEO of mortgage analytics firm Clayton Holdings told The Wall Street Journal.

The FHA, Fannie and Freddie received substantially more business after the 2007 housing market collapse; Fannie and Freddie were nationalized in 2008 because their capital reserves had declined severely.

Congress also increased the limits on the size of loans that these three government entities can guarantee, raising the ceiling to as high as $729,750 in high-cost housing markets such as New York and California.

Sanjiv Das, chief executive of Citigroup's mortgage-lending unit, expects the government's share of the mortgage market will change "substantially" during the next year.

“A year from now, I wouldn't be surprised if (the number of U.S. backed mortgages) is eight out of 10, as opposed to 9.5 out of 10," Das says, adding that reducing the government loan limits would also lower the government's share of the market.

The National Association of Realtors projects sales of existing homes will rise 6.6 percent this year to 5.49 million as a drop in prices, near record-low mortgage rates and growing incomes sustain demand beyond the recent pickup spurred by a government incentive worth as much as $8,000, Bloomberg reports.

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The U.S. government's massive share of the nation's mortgage market grew even larger during the first quarter, driven by a jump in the share of loans backed by government-owned housing-finance giants Fannie Mae and Freddie Mac. Government-related entities backed 96.5...
Government,Bigger,Role,Mortgages
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2010-36-13
Thursday, 13 May 2010 09:36 AM
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