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Federal government has dramatically expanded exposure to risky mortgages

The federal government has dramatically expanded its exposure to risky mortgages, as federal officials over the past four years took steps that cleared the way for companies to issue loans that many borrowers might not be able to repay.

Now, Fannie Mae, Freddie Mac and the Federal Housing Administration guarantee almost $7 trillion in mortgage-related debt, 33 percent more than before the housing crisis, according to company and government data. Because these entities are run or backstopped by the U.S. government, a large increase in loan defaults could cost taxpayers hundreds of billions of dollars.

This risk is the direct result of pressure from the lending industry, consumer groups and political appointees, who clamored for the government to intervene when homeownership rates fell several years ago. Starting in the Obama administration, numerous government officials obliged, mistakenly expecting that the private market ultimately would take over.

View the complete October 2 article by Damian Paletta on The Washington Post website here.

Categories: National Issues
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