Today the Obama administration outlined 3 different scenario’s that would shut down Freddie Mac and Fannie Mae as the backstops of the mortgage markets.
All of the administration’s proposals envision a scaled-back role for the government, and officials emphasized the goal of restoring the market for mortgage-backed securities issued without the government’s guarantee.
… One option proposed by the administration includes a new government backstop of certain mortgages under a federal ‘reinsurance’ model, while another would proposes a more limited backstop that would scale up primarily during times of economic crisis. The third option proposes no such government backstop beyond existing federal agencies such as the Federal Housing Administration. via the WSJ
The one unifying factor of all these plans is that interest rates would rise and the banking system would be expected to play a much bigger role in the housing industry.
That is not all bad. Sure it will be a shock to the system, but the federalization of the housing market is not a great thing for the industry. Instead, the ability of housing market and the banking sector to find it’s equilibrium is the most important factor in a healthy real estate marketplace.
And never forget, banks need to make their money. So loans will be harder to get and they will be more expensive, but they also will not be subsidized by your tax money.