Freddie Mac Study Claims Ginnie Mae Choice Proposal Would Cost Taxpayers $1.9 Billion Over 10 Years

March 19, 2002

Proposal Would Weaken the Federal Housing Administration

McLean, VA - A legislative proposal to allow the Government National Mortgage Association (GNMA) to securitize conventional mortgages would weaken both GNMA and the Federal Housing Administration and would negatively impact the federal budget by $1.9 billion over a ten-year period, according to a newly released study. [Read Full Report Here]

According to the study by Dr. Susan M. Wachter, Professor of Real Estate and Finance, The Wharton School, University of Pennsylvania, the GNMA Choice proposal may provide benefits to private mortgage insurers and some lenders, but likely will do so at the cost of reducing long-term homeownership opportunities for underserved populations.

"The program is a major departure from the historically successful role of the federal government in mortgage markets. As designed, it will not reduce the disparities in homeownership rates across borrower groups but in fact will threaten key programs which are successfully reducing those disparities," Wachter said. "Simply put, GNMA Choice would increase costs and risks to U.S. taxpayers without advancing the public interest."

Dr. Wachter reviewed the GNMA Choice proposal on behalf of Freddie Mac.

Source: Freddie Mac

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