I little background here. One reason that mortgage rates are so, is that the Federal government nearly all mortgages. This puts the tax prayers on the hook for any losses from the agencies. Redwood is arguing that system is can't go on, and we should return private mortgage market, set by supply and demand. This federal support also makes housing more expensive than people can afford.
Through Fannie Mae, Freddie Mac and Ginnie Mae, the government finances more than 95% of the mortgages currently being written in the U.S. When Congress comes back from recess in September, it will have a chance to begin unwinding its lifeline. The conforming loan limits, or the maximum amount of a loan that can be guaranteed by Fannie, Freddie or insured by the Federal Housing Administration, expires Oct. 1.
"Many real estate agents, homebuilders and banks appear to benefit from such a status quo. Our strategic outlook, however, is that over time the current outsized role of government support for the $9.6 trillion residential mortgage market is simply not sustainable, especially in light of the painfully heated debates throughout 2011 over raising the $14.3 trillion federal debt ceiling," Redwood said.