The gatekeepers of the American mortgage market are increasingly backing loans to borrowers who have heavy debt loads, highlighting questions about mortgage risk as policy makers debate ways to change the system, the Wall Street Journal reported. Almost 30 percent of loans that mortgage giants Fannie Mae and Freddie Mac packaged into bonds last year went to home buyers whose total debt payments amounted to more than 43 percent of their incomes, according to an analysis by industry research group Inside Mortgage Finance. The share has nearly doubled since 2015. Data on other government mortgage programs also show an increase. The backing of these loans opens up a debate about the government’s role in the housing market. Some say cheap, federally backed financing has made credit available for millions of borrowers who otherwise might not have had a shot at homeownership. Others say that more-indebted borrowers are riskier, and that their purchases may be accentuating a rise in home prices that in many areas has outstripped median incomes. An obscure half-decade-old rule made these mortgages to buyers with high debt possible. The temporary provision expires at the beginning of 2021, or, should it happen first, when Fannie and Freddie revert to private control, following government sponsorship after the housing crisis.
