As I mentioned in my previous post, one of the big unknowns for 2010 is the role of the government in the mortgage market, especially via the FHA and Fannie Mae / Freddie Mac. On the one hand, these entities now account for a tremendous (and still increasing) portion of overall mortgage activity. On the other hand, all are heading towards insolvency, which means their future is in jeopardy at the very time that their essence has grown to become indispensable. For better or worse, the federal government has already come to terms with this reality, and is already moving to ensure their survival.
In response to Fannie and Freddie’s increasingly precarious financial positions, the Treasury Department recently announced that it would no longer cap the amount it could spend to keep them afloat for at least three more years. (