Update on Fannie and Freddie

The government has agreed that Fannie and Freddie will be no longer. They plan to roll out the plan soon with the intention of completing the phase out in 5-7 years. The sole purpose of getting rid of Fannie and Freddie is to get government out of the mortgage industry and put the private sector back in. Right now, 9/10 mortgages are backed by the government. In addition to removing themselves, the government is also proposing changes to FHA loans in order to level the playing field. They still will require 10% down on conventional loans, but will raise monthly premiums another 25%, which will make qualifying for a loan a bit harder. The hope is that by raising FHA monthly premiums, it will be harder to qualify for the loan and buyers will be more inclined to go back to buying conventional loans which will be owned by private investors. The idea is that if private investors are ones setting the terms they will keep interest rates lower in order to compete with each other. Let's hope they're right. Guess we'll just have to wait and see.