The Obama administration has announced a ‘winding down’ of financial involvement in Fannie Mae and Freddie Mac at an annual rate of no less than 10% per year. Timothy Geithner predicts it will take three years for the housing market to recover. Then, an additional two to three years for legislators to come to agreement on the government’s role in funding future loans. After an agreement is reached it should result in new legislation. At this time, the three proposed ideas under consideration are:
1) private system – where lenders and investors fund new mortgages, with a limited subsidies for the poor and veterans.
2) private system – where government is involved during market stress to guarantee home loans.
3) taxpayers would insure securities backed by home loans