THE BASIS POINT

Investors Ramp Up Mortgage Plans Expecting Fannie, Freddie, FHA Market Share To Drop From 95% to 50%

Some confusion may end on Friday, when Treasury Secretary Tim Geithner present Congress with three options for reducing the government’s role in home finance. Pundits suggest that the US will have an 8-10 year period to reduce Fannie & Freddie portfolios. Look for a reduction in the maximum loan amount to $625,500, a gradual increase in guarantee/guarantor fees to reduce the total mortgage volume insured by the agencies from 95% currently to something closer to 50%, plans to bring in private money, and for the FHA program to be used for low income borrowers only.

According to Reuters, Blackrock fund is set to approve 10 lenders in its effort to expand into the home loan market. The fund, set at $1 billion, will provide money for non-Fannie/Freddie mortgage originations, with the goal being to package those loans into residential mortgage-backed securities. This is one of many firms ramping up mortgage plans in anticipation of a wind-down of Fannie, Freddie, FHA market share.