Compromise set on housing bill
TEXT OF STORY
Bob Moon: But Fannie Mae and Freddie Mac shares are up sharply this morning on news the White House has agreed to a compromise with lawmakers on that big housing market rescue bill. It’s aimed at helping millions of homeowners refinance at lower rates. And it provides a government backstop for the two companies that guarantee nearly half the nation’s mortgages.
Concern over Fannie and Freddie’s health caused home loan rates to jump in recent days. And Marketplace’s Dan Grech reports there’s no guarantee this action by Congress will help bring them back to Earth.
Dan Grech: From last Friday through yesterday, the interest rate on 30-year fixed-rate mortgages shot up nearly four-tenths of a point.
For a $400,000 loan, the increase would add $71 to a monthly bill. It’s all because investors fear Fannie Mae and Freddie Mac aren’t as rock solid as was once believed.
Economist Peter Morici at the University of Maryland says higher mortgage rates may be here to stay.
Peter Morici: It would appear that for the next couple of years, Fannie Mae and Freddie Mac will be viewed as riskier investments than they once were. And that they will have to pay more for money and charge higher interest rates to prospective buyers.
The timing couldn’t be worse for the faltering housing market. Home prices are already down about 18 percent, and rising mortgage rates will make it even more difficult to buy a home.
I’m Dan Grech for Marketplace.
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