New Boards at Freddy and Fannie

[J Grant]

You obviously are uniformed about how the mortgage market works as there is plenty of private capital that is more than willing to invest in conventional mortgages as private capital already owns the risk on ~2/3 of GSE mortgages thru mortgage securitizations. While, you probably already know that gse loans above 80% are insured by traditional private mortgage insurance but you probably don't know that GSE loans between 60% - 80% (with >20 years amortization) are also already insured by private capital through credit risk share transactions (by MIs and other entities). That leaves only mortgages with a less than than a 60% LTV or less than an 80% LTV and amortization schedules of 20 years or less) as GSE loans that are uninsured and these loans are of extremely low risk and there has been and will continue to be no problem attracting more than enough private capital to fund and purchase these loans.

If that were so, this mystery would cause plenty of private capital you allude to would be offering loans to consumers like mad - why aren't they? Nobody is stopping them!

The reality is that private capital exists now, and it does back loans, but not on the same kind of terms that the GSE offer via government-backed security; thus, loans backed by private capital offer terms such as short-term loans, high down payments, balloon payments, etc.

 

[timd354]

If that were so, this mystery would cause plenty of private capital you allude to would be offering loans to consumers like mad - why aren't they? Nobody is stopping them!

The reality is that private capital exists now, and it does back loans, but not on the same kind of terms that the GSE offer via government-backed security; thus, loans backed by private capital offer terms such as short-term loans, high down payments, balloon payments, etc.

So tell me smart one, what are the terms of the government backing for GSE securities?

 

[Trihard]

So tell me smart one, what are the terms of the government backing for GSE securities?

Without Fannie or Fredie mortgage interest rates would be 35%.