In October 2015, White House officials rejected proposals to release government-backed lending enterprises Fannie Mae (The Federal National Mortgage Association) and Freddie Mac (The Federal Home Loan Mortgage Corporation) from federal control. The companies have been operating under a conservatorship by the Federal Housing Finance Agency (FHFA) since 2008 as a result of the subprime mortgage crisis.
Over the past year, the Obama administration has faced pressure from lobbyists and affordable housing advocates to release the enterprises from their conservatorship. Whether they are released or not can affect the amount of money you can borrow to buy a home. For more information about how their remaining in conservatorship or becoming private companies once again will affect you as a real estate buyer or seller, discuss the details of your case with an experienced New York Business Law Firm.
What Would Releasing Freddie Mac and Fannie Mae Mean for Home Purchasers?
Affordable housing advocates claim that if Freddie Mac and Fannie Mae remain under government control, potential low-income buyers are shut out of the housing market. Freddie Mac and Fannie Mae operate by purchasing mortgage loans from private lenders, allowing the lenders to use this money to fund new mortgage loans. This is how mortgage lenders make a profit. Fannie Mae and Freddie Mac, once they have ownership of a mortgage loan, sell it as a bond on the secondary investment market. By playing such a large role in the United States’ credit system, Fannie Mae and Freddie Mac can prevent a complete meltdown of the mortgage and lending market, keeping mortgage rates affordable for buyers.
But when the housing bubble burst in 2008, Fannie Mae and Freddie Mac faced financial crisis and were bailed out by the FHFA. In 2012, the terms of their conservatorship changed, creating a situation where the government took all of the enterprises’ profits in profitable quarters and did not require a dividend in losing quarters, resulting in Freddie Mac and Fannie Mae paying the United States Treasury a total of $239 billion since the takeover. Now, the government is facing lawsuits from Freddie Mac and Fannie Mae shareholders alleging that the government’s changed terms in 2012 were unlawful. Part of this lawsuit is shareholders calling for the federal government to release the companies from its control.
As a potential home buyer, the government’s release of Fannie Mae and Freddie Mac could make it easier for you to obtain a mortgage loan or a loan with a lower interest rate. But the release could still be years away, depending on how this lawsuit progresses through the court.
New York Business Attorney. If you have Business Law questions and are in need legal assistance for litigation, appeals, construction law or need a Business Law Attorney contact the Law Firm of Menicucci, Villa, Cilmi PLLC for a no cost case evaluation. We are a Business Law Firm with offices in Staten Island, Brooklyn and New York City.
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