STOCK MARKET WATCH -- Monday, 17 March 2014

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21. Fannie Mae Wind Down Deemed Threat to Home Recovery: Mortgages

http://www.bloomberg.com/news/2014-03-17/fannie-mae-wind-down-deemed-threat-to-home-recovery-mortgages.html

A U.S. Senate plan to dismantle Fannie Mae and Freddie Mac (FMCC) may deliver an unintended blow to a fragile housing recovery.

A draft of the measure, which Senate Banking Committee leaders released yesterday, would replace the two financiers with a government-backed mortgage-bond insurer. It would cover losses only after private capital bears the first 10 percent, leading to higher mortgage rates, according to Credit Suisse (CSGN) AG analysts. The plan also would eliminate a mandate that a percentage of mortgages go to lower- and middle-income families, threatening to decrease America’s homeownership rate.

Senator Tim Johnson, a Democrat from South Dakota, and Senator Mike Crapo, an Idaho Republican, are trying to pass the measure this year. Outside the Senate chambers, the housing market is showing signs of cooling as tighter lending and higher prices shut out increasing numbers of first-time buyers.

“It certainly slows the rate of recovery,” said Kevin Chavers, a managing director at BlackRock Inc. and a member of its government relations and public policy group in New York. “It raises the question of what the implications are for the recovery as you raise costs and reduce the universe of people eligible to participate.”