Without Freddie and Fannie, could 30-year mortgage be a thing of the past?

Friday, 23 June 2017, 01:03:09 AM. Miami-based Fairholme Fund is among investors suing the federal government over the future of mortgage insurers Fannie Mae and Freddie Mac. At risk, say plaintiffs, is the 30-year fixed mortgage that makes home ownership affordable for most Americans. Also at issue: Whether the government can supercede shareholders’ rights.
Miamian Bruce Berkowitz has taken on a fight few would dare: He’s suing Uncle Sam. Berkowitz — whose mutual fund Fairholme Fund owns 14 percent of Fannie Mae and Freddie Mac preferred stock — is among a group of investors suing the U.S. government over the two government-backed mortgage insurance giants. They claim the U.S. Treasury Department illegally confiscated the companies’ earnings after their bailout, gutting the firms when it was supposed to rehabilitate them and setting a dangerous precedent for shareholders’ rights. The contest has turned into a war, with salvos fired in a half-dozen states where Fairholme and other plaintiffs have filed suit. One critical case will come to a head in August when a federal appeals court in Washington, D.C., is expected to rule. At first glance, the lawsuits sound like an esoteric battle of accountants, policy wonks and politicians. But the stakes could be as close to home as a three-bedroom, two-bath house in the suburbs and the typical 401K retirement account. Here’s why: Investors like Berkowitz say the Obama administration’s big-picture plan to wind down Fannie and Freddie poses grave dangers to home buyers and the real estate market — and sets up a potential windfall for the nation’s largest financial institutions. Without Freddie and Fannie, they argue, the fixed-rate 30-year mortgage that makes home ownership affordable for middle-class Americans could get significantly more expensive or even disappear. That would make it...Read more
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