Kill Off Fannie Mae, Freddie Mac and You Kill the 30-Year Mortgage as Well

Mainstreet reports:

The rumor mill is chugging along over the possibility the federal government could shutter Fannie Mae and Freddie Mac, albeit on a slow, gradual basis.

Earnings at both government-run enterprises have been anemic, and economists and mortgage industry professionals are talking openly about a future without them.

That could change the consumer mortgage landscape dramatically, says bank analyst Dick Bove, an analyst who tracks the mortgage market.

"Is the United States ready to take a shock to housing prices because we're getting rid of 30-year fixed rate mortgages?" Bove asks. He told CNBC that banking executives have told him privately they cannot make money on 30-year fixed-rate home loans anymore due to new rules on capital reserves and securitizing mortgages, and he says the U.S. Treasury Department is aiming to phase out Fannie Mae and Freddie Mac by 2018.

Other countries don't have a 30 year mortgage, like Canada, and the sky hasn't fallen.