Obama proposes overhaul of US mortgage system
President Barack Obama proposed to overhaul the system of finance mortgage in the US in order to speed up recovery of the housing sector. His proposal centered on the gradual elimination of Fannie Mae and Freddie Mac. These mortgage finance entities would then be replaced with another system whereby private companies would purchase the home loans from mortgage lenders. The acquiring firms would then repackage these loans as securities for investors. This move would ensure that capital would continue to flow freely to the housing market. Securitization of mortgage would also help make credit readily available. The role of the Federal government would be to provide guarantees and oversight protection.
It can be recalled that the housing market was among the worst hit when the US experienced a financial crisis from 2007 to 2009. Fannie Mae and Freddie Mac had to be rescued with USD 187.5 billion worth of taxpayers' money in order to stay afloat after the two firms got hit with losses.