US 30-year average mortgage rate rises to 4.08 percent

US 30-year average mortgage rate rises to 4.08 percent

Mortgage finance companies Fannie Mae FNMA.PK and Freddie Mac FMCC.PK should no longer be owned by the USA government, Treasury Secretary nominee Steven Mnuchin said on Wednesday.

"Absolutely. We've got to get Fannie and Freddie out of government ownership". The government wound up investing $187 billion to bail the two of them out. They were bailed out after the housing bubble burst by the USA government in 2008-a financial rescue that wound up costing taxpayers a whopping $187.5 billion over time, according to Bloomberg.

Munchin is making Fannie Mae and Freddie Mac shareholders great again.

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Washington's relationship with Fannie and Freddie is a bit complicated, though. "It's not going to be a refinance relationship, which is sort of a one-on-one relationship with a borrower, like maybe you did a loan with them two years ago and then you contact them and say, 'Hey, have you thought about refinancing?' Now, I think it's more about finding a way to get a hold of those homebuyers and probably a lot of that is through referrals from realtors". They buy them from lenders, wrap them into securities and provide guarantees to investors in case of default.

Fannie and Freddie have not always been under government control. Both groups have called on the GSE regulator Federal Housing Finance Agency to recapitalize the GSEs and embark on reforms that will eventually see them released from the conservatorship. The average 30-year FRM has risen by 51 basis points in the three weeks since the election and is at its highest point since the week of July 16, 2015, when it was 4.08 percent, according to Reuters. Their current bailout agreements require that they send almost all of their profits to the Treasury, while winding down their capital to zero dollars by 2018. Jeb Hensarling, the Texas Republican who chairs the House Financial Services Committee, in a speech earlier this month reiterated his desire to pass his own housing-finance reform plan, which would wind down Fannie Mae and Freddie Mac within five years. Tennessee Republican Senator Robert Corker co-sponsored a bipartisan bill that would also have eliminated the mortgage-finance companies.

The two eventually returned to profitability as the housing market recovered and the taxpayer cost has been repaid in full. Stocks in both Fannie and Freddie soared over 45 percent since Mnuchin made his announcement, as investor believe he will privatize the firms.

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