The housing crisis is eroding the confidence of our nation’s homeowners, financial institutions, and investors at an accelerating rate. Americans are growing anxious that the equity they’ve paid into their homes may not provide the financial security that home ownership once guaranteed. Worst of all, nearly 1.9 million borrowers across the nation – more than 50,000 of them in Texas – who have filed for foreclosure on their homes this year live with diminished hope that their own symbol of the American dream will be realized.
The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) each have similar roles in the home mortgage market. They buy mortgages from primary lenders – like banks – which make additional funds available to those banks to lend to other potential homeowners.
Fannie and Freddie were created by Congress specifically to make home ownership affordable and attainable for low- and middle-income Americans. Since 2000, Freddie Mac has provided $821.6 million in low-cost mortgages to Texas families. And as of May 2008, Fannie Mae has purchased over a million home mortgages in our state. Across the nation, Fannie and Freddie own or guarantee $5.2 trillion in home mortgages – almost half of all outstanding mortgages in the U.S. Because current regulation requires each firm to have a financial cushion of cash or securities, plummeting investor confidence is the basis for the current climate of crisis.
Economists of all philosophies agree that the collapse of Fannie or Freddie would have a devastating impact on the U.S. housing market and further damage an already-fragile U.S. economy.
