Dream Mortgage Bailout Has a Darker Side
It will go down as one of the biggest — and most popular — bailouts of the credit crunch. But who will pay for it later?
The Federal Reserve is buying hundreds of billions of dollars of low-interest-rate mortgages guaranteed by Fannie Mae and Freddie Mac. The purchases, which so far amount to $250 billion and could grow to $1.25 trillion, have driven mortgage rates to historical lows, inducing house purchases and sparking a refinancing wave.
This serves key social and political goals: It helps shore up house prices, while the lower mortgage rates put extra money into the pockets of people who aren’t struggling to service their mortgages. This then makes them less likely to oppose taxpayer-funded moves to support homeowners facing foreclosure.
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