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U.S. Backs 33% More Mortgages Than It Did Pre-Recession

WASHINGTON – Even though government-backed enterprises have stricter rules for guaranteeing mortgages, the number backed has gone up rather than down.

Company and government data reveal that Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) guarantee almost $7 trillion in mortgage-related debt – 33% more than they did before the housing crisis.

The increase has dramatically expanded the government’s exposure to risky mortgages, exposing taxpayers to potentially hundreds of billions of dollars in losses from loan defaults, and a time when a growing number of homeowners face debt payments that amount to nearly half of their monthly income. That could be a significant problem if the economy weakens or enters a recession.

The Trump administration will now allow Fannie, Freddie and the FHA to retain more capital to cushion against future losses.

Still, some have raised concerns that changes to the current system could disrupt the housing market and make it more costly for people to buy homes at a time when government officials are pushing to expand access to mortgages.

Source: Washington Post (10/02/19) Paletta, Damian

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Information provided by Florida Realtors.  Click here to see the original article.

Reprinted with permission Florida Realtors. All rights reserved. 

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