Replies to post #793376 on Fannie Mae-No Politics (FNMA)

[tutt1126]

If Fannie Mae and Ginnie Mac follow Freddie Mac’s lead into buying second mortgages, we estimate the secondary home equity loan market could exceed $3tn. By opening up the securitisation market for second mortgages, not only would more institutions be inclined to originate the loans, but the cost to borrowers would meaningfully decline with more finance providers. It would also provide big stimulus to an economy and consumer that appear to be slowing down without adding a dime to government debt. Rarely have I seen such a true win-win scenario for the government, Wall Street and the US consumer.

[tutt1126]

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Last month, the government-sponsored mortgage finance agency Freddie Mac filed a proposal with its regulator, the Federal Housing Finance Agency, to enter into the secondary mortgage market, otherwise known as home equity loans. This was a smart move by Freddie, and the FHFA will do a lot of good by approving it. Despite the more than $32tn in equity on homeowner balance sheets, very little of it has been tapped through home equity loans. In 2007, just before the financial crisis, there was more than $700bn in home equity loans outstanding. Today, there is roughly $350bn. Home prices have risen more than 70 per cent since then, so why have home equity loans halved?