Monday, September 14, 2009

Are new smaller mortgage companies taking over?

NEW YORK - The U.S. Mortgage Bankers Association said on Wednesday it will ask Congress to transform mortgage lenders Fannie Mae and Freddie Mac into several smaller, privately held companies that would issue mortgage securities with a government guarantee.

The proposed framework from the industry group would give successor entities to Fannie Mae and Freddie Mac the authority to create securities backed by certain types of mortgage.

The new companies would guarantee the securities against defaults on underlying mortgages and pay fees into a federal insurance fund that would make good on interest and principal payments to bondholders if the companies were unable to make them.

By Eric Gursky

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1 comment:

  1. The government plan to break down large mortgage firms such as Fannie Mae and Freddie Mac into smaller firms that issue government backed mortgage securities is a good precaution to ensure that a collapse of the mortgage market does not occur again. This will also create more stability in the current market and make it easier for first time home buyers to receive a mortgage.

    By: Stephen Barile