Obama Looks to Keep Feds in Mortgage Biz

Despite two White House proposals floated earlier in the year to get the federal government out of the housing market, President Obama will likely opt for the third option: reforming the housing market over the next decade but continuing to extend federal loan subsidies and insure most mortgages, reports the Washington Post. This option would also keep Freddie Mac and Fannie Mae, albeit possibly under different names and with new regulations that might include larger reserve requirements, shrunken portfolios, and fees to create an insurance pool for bad mortgages.

Maintaining a strong federal presence in the mortgage market upsets conservatives, who blame Fannie and Freddie for much of the housing bust. “There is only one legitimate role for government in guaranteeing mortgages: That is mortgages for low-income people, to enable them to buy homes," said a fellow at the American Enterprise Institute. But the White House counters that it's still "committed to winding down Fannie and Freddie ... though gradually and with care. We believe that it is essential to bring private capital back to the center of a reformed housing system," said a White House spokesman, who denied that any decisions have been made yet. (More Federal Housing Administration stories.)