Fannie & Freddie Backing More Mortgages of Those Deeply in Debt
A recent article by the Wall Street Journal says that Fannie & Freddie are increasingly backing loans to borrowers who have heavy debt loads, bringing up concerns about mortgage risk as to policy makers debate ways to make changes to the system. According to the WSJ, nearly 30% of loans packaged into bonds last year by Fannie Mae and Freddie Mac were from home buyers whose total debt payments amounted to more than 43% of their income.
“The backing of these loans opens up a debate about the government’s role in the housing market. Some say cheap, federally backed financing has made credit available for millions of borrowers who otherwise might not have had a shot at homeownership. Others say that more-indebted borrowers are riskier, and that their purchases may be accentuating a rise in home prices that in many areas has outstripped median incomes.“