WASHINGTON -- The government regulator for Fannie Mae and Freddie Mac has submitted a plan to Congress that would shrink the mortgage giants' roles in the housing market.
The Federal Housing Finance Agency's proposal for a leaner Fannie and Freddie was released Tuesday and would mean fewer mortgages are backed by the government. That could make buying a home more expensive because it would lead to higher interest rates.
Under the plan, Fannie and Freddie could also increase its prices to guarantee loans and establish agreements with private investors to take on added credit risk.
The Obama administration last year laid out three options to wind down the government's support for the mortgage market slowly. Rather than making a single recommendation, the administration left the decision to Congress.
Fannie and Freddie buy mortgage loans from primary lenders, pool them, and sell them with a guarantee that investors will be paid even if borrowers default. The agencies have helped people buy homes at affordable interest rates.
The Risk of Drastic Action
But the two nearly collapsed in 2008, after the subprime mortgage market collapsed and defaults and foreclosures piled up. The government seized them in September 2008.
The bailouts of Fannie and Freddie have so far cost taxpayers roughly $150 billion, and that figure continues to grow. Republicans have called for Fannie and Freddie to be abolished, and have largely blamed the two for leading the country into the 2008 financial crisis.
But there is a growing recognition that drastic action would upend the housing finance system, threatening the broader economy.
Since they were taken over by the government, Fannie and Freddie have bought or guaranteed about 3 out of every 4 mortgages in the United States and more than 10 million Americans have refinanced Fannie- and Freddie-backed mortgages.
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Most Popular Housing Markets
FHFA Plan for Government Lenders Could Hike Loan Cost
Median List Price: $186,000
Total Listings: 53,009
Median Age of Inventory: 138 days
Home Price: $4.995 million
Sq. Ft.: 12,000
Users of Realtor.com searched for homes in Chicago more than any other city in January. With a little over 53,000 homes for sale, the city has ample supply for house hunters.
Behind this luxury home's brick and limestone exterior, is a whopping 12,000 feet of space. The listing description claims the house offers just the right balance of public and private spaces.
Median List Price: $81,700
Total Listings: 22,370
Median Age of Inventory: 70 days
Home Price: $290,000
Sq. Ft.: 2,800
Speaking volumes to the affordability of Detroit housing, not one of Realtor.com's Detroit listings is priced above $1 million.
This $290,000 home is high-end as far as the city's market goes. The apartment, which features waterfront views, dates back to Detroit's heyday when the American automobile industry was firing on all cylinders.
Median List Price: $320,444
Total Listings: 26,858
Median Age of Inventory: 83 days
Home Price: $10.95 million
Sq. Ft.: 13,699
Los Angeles' median home price may tower over the national median (which is below $200,000); but in coming in at No. 3 on our list, that apparently hasn't stopped prospective buyers from scouring the city's listings.
This spanking-new, palatial mansion features floor-to-ceiling windows that display the home's jaw-dropping panoramas for all they're worth.
Median List Price: $221,995
Total Listings: 21,693
Median Age of Inventory: 124 days
Home Price: $4,898,100
Sq. Ft.: N/A
Philadelphia's median home price hovers above the national median by a considerable margin. The city has one of the highest average inventory ages on our list. That may induce more sellers to cut their prices.
Median List Price: $169,500
Total Listings: 17,699
Median Age of Inventory: 69 days
Home Price: $2.75 million
Sq. Ft.: 6,917
Phoenix-Mesa, bringing cheaper than average homes to the home-buying table, is fifth on our list. Perhaps luring flocks of bargain hunters, the area's homes are selling significantly faster than in most cities.
This contemporary has a well-landscaped courtyard and guesthouse. The listing description plays up the home's privacy, which makes the home "feel miles away."
Median List Price: $142,000
Total Listings: 18,827
Median Age of Inventory: 110 days
Home Price: $3,999,999
Sq. Ft.: 6,763
Florida is one of the states hit hardest by the the housing bust with rampant foreclosures driving down home prices all around the state. So it's no surprise that buyers have the Tampa-St. Petersburg-Clearwater area in their crosshairs.
This magnificent waterfront manse sits on some prime Tampa real estate. Price per square foot? $591. While that may strike you as exorbitant, keep in mind, pre-meltdown, this place's value surely dwarfed its current price tag.
Median List Price: $189,900
Total Listings: 16,291
Median Age of Inventory: 94 days
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Sq. Ft.: 5,025
Dallas' median home price hovers around the national median, rendering it a fairly affordable city to your average American.
This home, however, is not affordable to your average American -- but, hey, it's fun to look at. The contemporary sits on a one-acre lot that stares out at the Dallas skyline. Recently, the home's price was slashed to $6.49 million.
Median List Price: $121,000
Total Listings: 21,665
Median Age of Inventory: 105 days
Home Price: $8 million
Sq. Ft.: 13,489
Las Vegas took one of the biggest shellackings from the bursting of the real estate bubble, with its median home price plunging by more than 60 percent. It would seem that buyers are keen on taking advantage of the rock-bottom prices.
This massive luxury home almost certainly used to be worth well over $10 million. Now the 13,489-square-foot behemoth is running for $8 million.