Wealthier homeowners get government-backed loans once reserved for lower-income buyers

September 13, 2012 01:00PM

Government attempts to stimulate lending have meant that loans to the wealthy are being backed by Fannie Mae and Freddie Mac nearly as often as they are for their working-class counterparts, according to a Reuters report cited by NBC News.

Since the housing crisis, the limit on loans guaranteed by Fannie Mae and Freddie Mac has been bumped by Congress to $729,750 from $417,000, meaning that some homeowners are paying very low interest rates on large amounts of cash.

In New York’s relatively wealthy Nassau County, L.I. Fannie and Freddie backed approximately seven out of 10 new mortgages in 2010. But in Baltimore, where average incomes remain below the national average, the government backed nearly the same percentage of loans.

Critics argue that Fannie and Freddie should only back mortgages for low and middle-income buyers. “Nobody I know buys a house for $600,000 or $700,000 who isn’t affluent,” John Taylor, of the National Community Reinvestment Coalition, said.

But others argue that wealthy investors have come to expect government-backed loans and that it would be unfair and damaging to the economy to change that now. “We’ve had government support for housing finance for 75 years. You can’t just pull the rug out from under that,” John Campbell, a Republican congressman, said. [NBC News] – Christopher Cameron