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Mortgage Bailouts Reaches the Hundred Billion Mark

By Faye Mergel
Published: Sunday, June 27th, 2010

3With private loan providers being all the more too picky with aspiring home owners, government-owned Freddie Mac and Fannie Mae comes over and provides home loans to almost every person—with or without stable employment or source of income. While it is supposedly a major consideration for private home loan providers, these government-owned lending institutions did not bother to check the capacity of the people for repaying loan. To date, both institutions have a combined total of $145 government credit.

And people are quite skeptical about that amount being payed in the next few years. In fact, the housing bubble which caused the US economic recession started from this indiscriminate awarding of loans to almost everyone who applies for one. Credit scores become less important since those with excellent and poor ones still secure a loan at the end of the day. And since most of those awarded with home loans were eventually faced with unemployment issues, they were unable to repay the loan. The houses were foreclosed and Freddie and Fannie institution is also at the losing end as they lose thousands of dollars in foreclosed houses.

If the loans are ever paid in the future, it will already go up to the 1 Trillion mark. It is also hardly any laughing matter since this mortgage business of Freddie and Fannie is directly connected to the economy of the United States. Since both institutions have unlimited access in securing their home loans from the line of government credit, the institutions presumed that they will be able to give out as much loans as they would want to. However, it became apparent that this awarding of loans were haphazardly done since more than half of the total number of loans were delinquent and will not be paid by the unemployed individuals who secured them.

Most likely, the money that will be used for the home loan bailout will come from the taxpayers’ money. This means that if the government continues to pay for the compounded home loans, it will have to divert its tax fund for other projects to this major bailout plan. Then again, if the government fails to provide bailout for Fannie and Freddie then it will also be a big problem since people will be homeless and have to go to shelters intended for the homeless or apply for social support.Either ways, the government is expected to spend much money.

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