When the Treasury announced on Christmas Eve that it was lifting the limit on how much Fannie Mae (FNM) and Freddie Mac (FRE) could receive, one point that may have been lost on people was that neither of the GSEs were yet anywhere close to the $200 billion they’d been alloted.
It’s not like there was a need, under the current system to give them a permanent, unlimited blank check to cover their losses.
So then, maybe that’s not what’s going on.
Maybe it’s this, via MarketWatch:
The government’s decision to provide unlimited support to Fannie Mae and Freddie Mac probably presages more aggressive action to prop up the U.S. housing market.
The government may put a mortgage-modification effort, called the Home Affordable Modification Program, or HAMP, into overdrive in coming years, pushing for reductions in the principal outstanding on home loans overseen by Fannie and Freddie Bose George, an analyst at Keefe, Bruyette & Woods, wrote in a note to investors Monday.
So basically, Fannie and Freddie will be called on to do everything humanly possible to prop up the housing market in the coming years. Mortgage purchases, principal reductions… everything. And as it goes nuts in its efforts, it will need a blank check so that its lenders don’t even get slightly nervous.
Another serious dip in housing would be killer to this recovery and Obama’s Presidential career. That can’t be let to happen.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.