Was it just three years ago that sub-prime mortgages, or was it the scandal of sub-prime mortgages, was the trigger that set off the worldwide economic collapse and it became the first priority of the newly elected Obama administration in terms of getting out of the recession? It seems like light years away yet there is probably no one in America whose home equity and 401K or other pension program is still not suffering as a result of the crooked manipulation of the housing market.
So where are we in attacking the first of the economic disasters that hit? Fannie Mae and Freddie Mac, the two troubled mortgage giants, were seized by the government nearly two years ago and now own or guarantee 56% of all American mortgages, and they are losing billion of dollars. Nine out of every ten new mortgages originating today are backed by Fannie Mae, Freddie Mac or the Federal Housing Authority.
The government has already pumped $150 billion into the two giants and some economists estimate it will take up to $1 trillion to keep them afloat. They now hold $210 billion in bad loans. In July there were over 2.02 million homes in foreclosure and 5 million more homeowners were behind on mortgage payments.
The Federal Reserve now owns around $1.09 trillion in mortgage-backed securities. The Obama $75 billion mortgage rescue program was a failure. Housing prices continue to remain at a six year low while inventories are bloated. At the same time the Fed loans money out to lenders at a 0-.025% interest while mortgage rates remain at the lowest levels ever seen in modern times.
Curiously, Obama did not include housing reform in the financial reform package even though the fraudulent housing securities were the main cause of the economic collapse. Much work remains to be done to stop people from walking away from mortgages worth more than the homes, to halt the record number of foreclosures, to stabilize housing prices, to sell the huge housing inventories and to encourage home building and purchases.