For more than 20 years, the mantra in Washington has been “more, not less” when it comes to Fannie Mae, Freddie Mac and the expansion of homeownership.
But in light of the financial crisis and Fannie and Freddie’s near-collapse, policy leaders are also rethinking the government’s role — and many Americans are starting to question whether homeownership is the only path to the American Dream.
Fannie and Freddie function by buying, bundling and then stamping a government guarantee on mortgages. Then they sell them to investors. It keeps the banks happy because it keeps capital flowing, and it keeps consumers happy because it makes low, fixed-rate mortgages possible.
At least that how things were supposed to unfold. But the two mortgage finance giants “made astonishing mistakes,” Raj Date, executive director of a financial policy think-tank called the Cambridge Winter Center, told NPR’s Audie Cornish.