He who has the gold makes the rule, of course.

Fannie and Freddie have been having problems for years, and with the “mortgage mess” as they call it, the problems have erupted into two very large failing businesses. 

If they go out of business and the government cannot bail them out,  what will happen to the mortgage industry?  Let me say that I do not think that will happen. If so, that means we have much larger problems than mortgages that are draining our governments resources. But, if it did happen?

If FannieMae and FreddieMac go out of business, lenders themselves will have to provide mortgages without any source to sell them to.  If they are going to hold a mortgage for any amount of time, two things will happen.  One, the banks will each create their own guidelines for lending and two they will be able to charge any interest rate they want.

If lenders have to hold onto loans (portfolio) they will want to charge higher interest rates because they will need the income.  As I have said before, lenders do  not make their money from providing mortgages, they make their money from selling them.  So, who know where the rates will go.  If lenders are going to lend out their own money, they will create their own rules to follow.  This means that each lender will have their own niche and risk levels.  There will be lenders out there advertising all different rates and the confused consumer will not know where to go for a loan.

I guess at that time there will be a need for mortgage brokers to dive into the mess and clear a path for the borrower to lender.

Dale Siegel