It’s been years and years Fannie and Freddie took their throne as the one that formed a rapid, secondary market for mortgage loans by standardizing terms. Later they package the loans into securities that carried a payment guarantee. At the beginning, the plan worked well, the investors who had decided to purchase securities provided money for new mortgage, but its good fortune ended when the home prices collapsed.

It brought Fannie and Freddie undone by loans so everything was considered to be too risky afterward. Responding to this situation, the government has supplied more than $1300 billion to honor their debt and loan guarantees. People have tasted so many advantages they received from Fannie and Freddie, with the failure the company suffered from people start predicting how their life would be without the company.

The current action taken comes with the purpose to shrink the market in government-backed loans by turning the company to be less attractive relative towards still-scarce private-label loans. Fannie and Freddie has increased the charges for most loans with terms longer than fifteen years, this terms are still applied for borrowers who obtain perfect credit scores and 25% equity.

With the significant change occurs in market which is also affected by the fall of Fannie and Freddie, the plan regarding how to restructure the mortgage market leads to a great debate. It includes the restructuring of the mortgage market for the long term. Dealing with this situation, many proposals have been submitted, including a trio from the Obama administration.

The proposals from Obama administration have three major aims. It is said that the first suggests the privatization of the mortgage market entirely, but it doesn’t apply to Federal Housing Administration as well as other insurance plans for low- and moderate-income borrowers. Meanwhile, the second one would increase a government guarantee for mortgage securities and it will only be activated in crisis hours.

The last one, it comes with the exact purpose by noting a group of private companies should offer investors with guarantees on mortgage securities. The market is facing a likely critical situation with Fannie and Freddie lost their role. It is predicted that the rates can be significantly raise at a quarter of a percentage point and for this most lenders may request larger down payments or better credit. For borrowers, it seems that they must face a major shift on terms and conditions.