Will GOP Put an End to Bailouts for Freddie and Fannie?

With the next Congress taking over in a matter of weeks, there are many questions brewing as to some of the changes that they will be making. Many of those changes are going to directly affect you – the average American citizen – but one decision may affect you more than the others.

The Republican leaders that are set to take over Congress plan to put an end to the bailouts and monies given to Freddie Mac and Fannie Mae. According to Tom Price, a representative from Georgia and the chairman of the Republican Study Committee, the Democrats and the Obama administration has used these two giant mortgage institutions to “manipulate the housing market,” which helped contribute to the debacle that has all but brought the market and parts of the economy to its knees.

Another representative – Republican Spencer Bachus from Alabama – said that his first priority as the potential incoming chairman is to end the federal assistance that the government has been giving to Freddie Mac and Fannie Mae. Since these two major companies either own or guarantee about half of the mortgages in the United States, refusing to give them any more federal financial help would have a major impact on them as well as the mortgage borrowers who have their mortgages through them.

However, Bachus said that the change won’t take place in a matter of days. According to him, subsidizing the mortgage market with money from the taxpayers is an “addiction” and addictions cannot be cured overnight. He said that the transition will take place over several years in order to minimize any problems that will occur as a result of the change.

Democrats have also accused Republicans of doing nothing to help the mortgage institutions in the past. The Republicans had control of the House of Representatives from 1995 to 2007.

In addition to stopping the federal funding to Freddie Mac and Fannie Mae, the Republicans want to have the government oversee the two institutions more closely. This includes the two institutions being more transparent with their accounting practices as well as creating a position for an independent inspector general.

What do you think this will do to the mortgage rates if these two mortgage giants lose their federal funding? Will it make the rates spike or will it help them go down even further? Let us know your thoughts below.