[quote=ctr70]. . . Fannie/Freddie NEVER did ONE option ARM ever…those were 100% Wall Street products securitized by Credit Suisse, Morgan Stanley, Merrill Lynch, JP Morgan and Goldman Sachs (GS who also made huge bets with credit default swaps that their OWN LOANS they securitized & sold off would go bad… AND paid a half a billion settlement with the SEC b/c of that!).

. . . Obviously we have to get the private label lending back and drastically reduce the Governments lending footprint. Not sure how that will be done though w/out much higher rates.[/quote]

ctr70, totally agree we need to get the “private label” lending back and but disagree that F/F did not guarantee “Option Arms.” Up until about 2002, F/F DID guarantee some fully underwritten (prime and Alt-A) option arms (some with neg-am features). These loans had much more stable terms than the exotic variety of “exploding mortgages” we saw originated in the bubble years. They had indexes tied to the COFI (11th Dist of the FHLBB in CA) and the 1-yr T-Bill. Many of these mortgages (all 30 yr) stayed within the portfolio of the (local or “Big” bank lender) and were never sold off. Some are still performing today. I have one which has fully amortized from its origination date and is currently at 4.234%. How, you say?? I consciously CHOSE to pay Option 3 every month (the fully-amortized rate). Prior to this Option ARM, I have had a few others since the late 80’s and have known others (even high earners) who also chose them. They are a good and fair product if used correctly by the borrower. It was actually the borrower who abused a mainstream (not sub-prime or exotic) Option ARM and thereby caused it to go neg am and explode on them by the choices they made each and every month when they sent in their mortgage payments.