On mortgage rates, government should keep significant role, Obama says
President Obama has concluded that the government must continue to play a significant role in the nation’s mortgage market, extending a federal loan subsidy for most home buyers, according to people familiar with the matter.
Obama, who has promised a new vision for how the nation finances home buying, has directed a small team to develop a proposal that would largely maintain the government’s role as an insurer of mortgages for most borrowers. The proposal could even preserve Fannie Mae and Freddie Mac, the mortgage finance giants owned by the government, although under different names and with new significant constraints, said people knowledgeable about the discussions.
The president’s decision to preserve a major role for the government marks a major milestone in the effort to craft a new housing policy from the wreckage of the mortgage meltdown and could mean a larger part for Fannie and Freddie than administration officials had signaled.
If this approach became law, it probably would keep in place the kind of popular home loans that have been around for decades — 30-year fixed-rate mortgages with relatively low interest rates.
The plan is likely to draw criticism from many Republicans, who blame the financial crisis on policies they say overly encouraged the housing market. And many economists, including some who have worked in the White House under Obama, consider the federal role harmful to the free market.