An intensified effort to exploit government control of Fannie Mae and Freddie Mac to drive down US mortgage costs and cushion a decline in house prices could start soon. Support is building for a plan to offer government-funded 4.5 per cent mortgages for new home purchases that would be sold by banks, securitised by the mortgage giants and sold on to the government. This proposal – based on an idea by Glenn Hubbard and Christopher Mayer, professors at Columbia University – is being considered by Hank Paulson, wh0 may launch a version of the plan as a final hurrah before leaving office. The plan is likely to continue under the Obama administration, and by the time it is over, the US taxpayer could own a large chunk of the US residential mortgage-backed securities market, the FT said.

This entry was posted by Stacy-Marie Ishmael on Monday, December 15th, 2008 at 5:26 and is filed under Capital markets. Tagged with Fannie Mae, freddie mac, hank paulson, housing, usa. Edit this entry.