12 Feb '11, 9am

Banks may reap returns from US mortgage reform

NEW YORK - ONE group of winners under the government's new mortgage plan: banks, whose income from home loans could jump. The US Treasury Department on Friday said it planned to reduce the influence of Fannie Mae and Freddie Mac in the mortgage market over multiple years. Banks have been quietly lobbying for the demise of the two government-supported mortgage giants for years. There will be some drawbacks to Fannie Mae and Freddie Mac's reduced role, but on balance banks will likely come out ahead, analysts said. Fannie Mae and Freddie Mac have dominated American home finance since the end of World War II. The companies essentially bear the risk of mortgages defaulting, leaving banks with mainly interest-rate risk. Under the proposed new model, investors and banks would provide the bulk of funding for mortgages, directly or through purchases of non-government mortgage-back...

Full article: http://www.straitstimes.com/BreakingNews/Money/Story/STIS...

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