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America's housing market

Falling prices and rising foreclosures cause a policy quagmire

America's housing market

Feb 3rd 2011 | WASHINGTON, DC | from PRINT EDITION

WHEN the federal government took control of Fannie Mae and Freddie Mac, two teetering mortgage-finance agencies, in September 2008 it was meant to be temporary. Yet their surreal existence as shareholder-owned prisoners of the state looks likely to drag on for years.

Nobody is happy with the status quo. The federal government routinely guarantees 85% or more of newly issued residential mortgages, primarily through Fannie, Freddie, and the Federal Housing Administration (FHA). But withdrawing that support is impossible while the housing market is so fragile. The Treasury is scheduled to release a proposal for overhauling America's housing-finance system as early as next week. But rather than resolve the status of Fannie and Freddie, it is likely to lay out several options, none of which is likely to become law any time soon.

http://www.economist.com/node/18070210

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