Last week the United States Congress began discussing its plan to overhaul the American mortgage market.
A House financial services subcommittee had their first hearing last week on the future of Fannie Mae and Freddie Mac which are currently under federal control.
The initial hearing was to determine the various types of loans as well as the interest rates that home buyers might have access to in the future. For years Fannie Mae and Freddie Mac dominated the real estate home loan market and during their rise they developed the protocol on every aspect of the loan industry from loan sizes, the requirements needed to obtain credit, the down payment structure and underwriting standards.
Part of last weeks discussions included the idea that Freddie and Fannie might become a single loan entity that would be a privately-owned and federally-regulated super corporation.
Since the hearings the Obama Administration has been silent about their viewpoint on this idea.
Other ideas that were brought to the table during the hearing was the possible plan to broaden the mortgage types this new "super-corp" might take on which may include certain types of mortgages that Freddie and Fannie couldn't touch previously that included jumbos and commercial real estate.
A representative of the National Association of Realtors said commercial real estate loans and jumbos are suffering too in the current credit crunch and they too are in need of more support.
The Mortgage Bankers Association presented at the hearing alternative plans for Fannie Mae and Freddie Mac that included making them a government-owned version of the Federal Housing Administration and Ginnie Mae, but would also handle conventional types of mortgages.
It was further suggested by the MBA that there should be some consideration to the idea that Freddie and Fannie might be a private co-op, in which banks and other mortgage industry lenders would combine their assets and provide another market of services besides just mortgage loans.
Also under this co-op plan, the federal government would also provide back-up insurance against "catastrophic losses" that went beyond the private co-ops capital and assets.
Despite the unknown future of Freddie Mac and Fannie Mae, Congress will continue to hold additional hearings throughout the year. Hopefully by next year, if the recession is over and the housing market is in better condition, the Obama administration will decide on what would be their preferred solution with the Fannie Mae and Freddie Mac situation. One thing is for certain, they would most likely not let Fannie and Freddie become sole private entities.