Closing Fannie, Freddie Could Up Mortgage Rates

August 8, 2013
Associated Press 
mortgage lending news

If Congress shuts down Fannie Mae and Freddie Mac, borrowers likely will end up paying slightly higher mortgage rates. Proposed House and Senate bills would wind down the two firms over five years and scale back the government intervention in guaranteeing mortgage securities. The House GOP bill would virtually privatize the mortgage market, while the Senate's bipartisan plan would limit Washington's role in insuring mortgage securities. Both plans are meant to shift more mortgage financing risk from the government to the private sector in order to prevent future taxpayer-funded bailouts. Mark Zandi, chief economist at Moody's Analytics, suggests that, as a result, typical borrowers could pay about $75 per month in extra interest payments -- or about half a percentage point more -- under the Senate proposal, and about $135 more under the House plan. That could be the average on a conforming loan of about $200,000 with a 20 percent down payment.

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