The Mortgage Crisis Is Not Over Yet

The Mortgage Crisis is not over yet. Read the news from this week’s Wall Street Journal:

Fannie Mae announced Friday that it is cutting back on its purchase of mortgage securities, focusing instead on buying jumbo loans.

Freddie Mac announced a similar decision last Wednesday.

The moves are expected to trigger a sell off of mortgage securities that will drive down their values. This will likely further tighten an already hobbled market.

Observers say that this kind of decision begs the question of whether Fannie and Freddie should really be public companies.

As the biggest buyers of these securities, the decision by Fannie and Freddie “raises the question of who is going to buy these mortgages,” said Ajay Rajadhyaksha, U.S. head of fixed-income research at Barclays Capital.

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