The Obama Administration is pushing for closure on the mortgage crisis, and it may be coming at the expense on Fannie Mae and Freddie Mac.  These two quasi-corporate government sponsored enterprises are being blamed for much of the mortgage meltdown due to their elasticized credit guidelines throughout the sub-prime gold rush.  Now a plan has been introduced to eventually phase them out, turning to privatization in the mortgage markets instead.

What does this mean for mortgage rates?  Possibly an end to the 30 Year Fixed mortgage, the most popular loan product in America due to its ability to keep payments low and affordable.  Since the 1950′s, the 30 Year Fixed mortgage has enabled more people to become homeowners by making it easier to qualify.  Longer amortization periods are backed by Fannie Mae and Freddie Mac so investors had a guarantee.    But without Fannie and Freddie, many private investors are not interested in long term loans, favoring shorter term rate periods such as adjustable rate mortgages or ARM’s instead.

I believe that we will see an evolution to new products and programs over the next few years and that the mortgage industry will be a different animal 10 years from now.  What’s working in Australia, Canada, and the U.K. is making its way here.  And although it may sound scary, I think it will greatly benefit consumers in the long run.