Government's role in home mortgages may get cut - WMC Action News 5 - Memphis, Tennessee

Government's role in home mortgages may get cut

WASHINGTON (NBC) - The Obama administration is laying the groundwork for cutting the government's role in the home mortgage market.

Since the government has taken over Fannie Mae and Freddie Mac, they now own or guarantee more than 90 percent of mortgages across America.

"The private sector was getting all the gains and all the profits from the role of the government, and the government took all the losses," CNBC Senior Economics Reporter Steve Liesman said. "The idea is to take the taxpayer off the hook over time for all the potential losses of the housing market."

This will come at a cost. Interest rates could go up, and homeowners would have to cough up down payments of 10 percent or more.

"Over the long run, the cost of mortgages will rise modestly for the average American homeowner," said Treasury Secretary Timothy Geithner.

The government will still retain a limited role in the mortgage market, like it has done for decades with FHA loans.

"The bottom line, it appears as that there will be there will be some level of government backing assuring that middle-class Americans would have to be able to tap mortgages at attractive terms," National Association of Realtors' Lawrence Yun said.

Geithner says it could take seven years to dissolve Fannie Mae and Freddie Mac.

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