Thursday, January 6, 2011

Why We Can't Have Low Cost 30 Year Mortgages Without Government Guarantees

This article explains the problems with the the 30 year mortgage market. Private investors and banks do no want to take the default risk and the interest rate risks associated with these products. The interest rates on such products, without a government guarantee, would increase the interest rate and create more problems in the housing market. This problem cannot be fixed by getting rid of government sponsored entities like Fannie Mae, Freddie Mac and the FHA which are the only purchasers of these products today. GOP proposals for getting government out of the market are dead on arrival.

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