You're already paying for Fannie and Freddie

As rumors of big mortgage companies' collapse swirl, many Americans are unable to find affordable home loans.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Les Christie, staff writer

I believe the best future for energy lies in:
  • Oil
  • Solar
  • Wind
  • Something not yet discovered
Mortgage estimator
Estimate monthly housing payments
Price of home:
Interest rate:     %
Yearly property taxes:
Yearly homeowner's insurance:

NEW YORK ( -- The fate of Fannie Mae and Freddie Mac may be hanging in the balance but many mortgage borrowers already find themselves struggling to find affordable loans.

Because of the turmoil surrounding Fannie and Freddie, recent borrowers are likely paying nearly 10% more in monthly mortgage payments than they would have.

The added cost stems from an erosion in confidence in Fannie and Freddie, according to Mark Zandi, chief economist for Moody's

Fannie and Freddie borrow money in the bond markets to pay for the mortgages they buy from lenders and then sell to hedge funds and other investors. Their cost of borrowing that money has now gone up, and that filters down to lenders who have to charge more to borrowers.

"It does have an impact on mortgage interest rates," said Richard DeKaser, chief economist for National City Corp. "It will be more expensive for Fannie and Freddie to acquire mortgages and that will ripple through the market."

And mortgages are not only getting more expensive for ordinary borrowers but they're also harder to obtain as lenders tighten up their standards.

"Some lenders are really pulling in their horns," said Steve Habetz, a Connecticut mortgage broker. "They're getting scared. They're demanding really clean loan applications with every i dotted and every t crossed."

What is happening now is compounding the damage which has already devastated the housing market.

The troubles for Fannie and Freddie could even affect current mortgage borrowers since they put the housing rescue bills that Congress has been agonizing over for months in jeopardy, according to Zandi, who has testified before the Senate on aspects of the bills.

Congress has upped the value of the loans Fannie and Freddie can buy, as well as the total dollar amount they can hold.

And a bill in the Senate calls for an expanded effort by the Federal Housing Administration to insure risky mortgages. Fannie and Freddie are being called upon to cover the potential cost to taxpayers. Now their weakened position calls into question their ability to do so.

"The ability of [Fannie & Freddie] to become more aggressive in extending credit, which is what the policy makers hoped and planned for, may be compromised," he said. "It could further delay any housing recovery." To top of page

Find mortgage rates in your area

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.