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Fannie and Freddie to be phased out?

Already bailed out with public funds to the tune of $134 billion, mortgage giants Fannie Mae and Freddie Mac might soon be facing some major changes. Today, the White House unveiled a proposal, which spells out a plan to gradually “wind down” Fannie and Freddie until they are completely phased out. But while the news that the Obama administration supports such efforts is welcome, this announcement isn’t am momentous as it might at first appear.

The proposed changes could have a major impact in the costs of home loans, as well as downpayment amounts. It could also mean big changes for the Federal Housing Authority (FHA) the Department of Housing and Urban Development (HUD). Although the Obama “white paper” spells out some basic phase out guidelines, it doesn’t really get serious about turning off Fannie and Freddie until possibly as late as 2018. Even if Obama is reelected, that would simply defer the tough job of actually managing the phase out to the next president. Additionally, Congress will have to approve any major changes in federal mortgage policy, which is easier said than done. In the end, this document could be empty promises, which punts mortgage overhaul to the next guy or they could be something more. Only time will tell.

via Wall Street Journal

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Matt Kastner

Matt Kastner is an Investment Real Estate Consultant at St. Louis Real Estate Society in St. Louis, Missouri. He is also develops properties on the side through Threshold Properties. When he isn’t representing investors in the purchase or sale of multifamily properties, rehabs, foreclosures and other income producing properties, he is often taking on rehab projects himself. He lives in South St. Louis and has been in the real estate business since 2004.

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