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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (15572)	12/22/2003 12:34:48 PM
From: ild	Read Replies (1) \| Respond to of 306849

Les, do you have a link for the report? Fed Study Finds Fannie, Freddie Don't Boost Home-Buying By Dawn Kopecki WASHINGTON -- The U.S. Federal Reserve released a staff study Monday saying the federal subsidies bestowed on government-chartered companies Fannie Mae (FNM ) and Freddie Mac (FRE) are far higher than any previous estimates and the two do little to increase homebuying, lowering mortgage costs by just a fraction of previous estimates. "Fannie Mae's and Freddie Mac's ambiguous relationship to the government imparts an implicit subsidy to GSE shareholders and homeowners," the study reads, placing a dollar value on that relationship at between $119 billion and $164 billion. The report, prepared by staff economist Wayne Passmore, is the toughest analysis to date on the companies' federal benefits and on how much of that gets passed on to consumers. The two were created by Congress to provide liquidity to the U.S. mortgage markets and lower costs for homebuyers. While the Federal Reserve Bank of St. Louis has publicly criticized the companies in the past, the Passmore report is the first study on the companies' funding advantages by a staff economist at the Federal Reserve Board. The study estimates that Fannie and Freddie's participation in the secondary mortgage markets only lower costs for borrowers by an average of 7 basis points, or seven-tenths of one percent. Previous estimates have placed the reduction in mortgage costs at about 25 basis points or one quarter of one percent. "Attempting to use government-sponsored enterprises (GSEs) to lower mortgage rates is indirect and, perhaps, less effective than a direct subsidy would be," Passmore writes.