Oct 17, 2011
Fannie and Freddie could sell bonds without a gov’t guarantee
17 Oct 2011
Posted by Andrew Kantor
The Obama Administration is looking at various ways to get private industry back into the $10+ trillion secondary mortgage market and start getting the federal government out.
The latest idea being floated: Let Fannie and Freddie (which control something like 90 percent of the secondary mortgage market) sell some mortgage-backed bonds to private investors without a federal guarantee but paying higher interest rates.
You may recall that Fannie and Freddie were formed to buy mortgages, securitize them, and sell those securities with an implicit government guarantee against default. This plan would create a very different type of product: more risk, more reward.