A $4 trillion plan could make or break dreams of U.S. homebuyers

"What are they trying to fix, exactly?”

Washington says a major change in the mortgage-backed securities market could make home loans more affordable nationwide.

Not everyone on Wall Street is so sure.

The revamp, the most significant overhaul of the market in a generation, will virtually eliminate the distinction between bonds issued by Fannie Mae and Freddie Mac, which guarantee nearly half of U.S. residential mortgages. The hope is that blending the two will improve market liquidity and, as a result, mitigate investor risk while helping keep a lid on mortgage costs.

But skeptics warn that the change could actually raise mortgage rates, rather than lower them. The big test starts on June 3, when the first of a new breed of combined security is set to roll off the line. It’s the final step in a more than five-year process to unify a roughly $4.4 trillion pile of agency MBS currently split between the two government-sponsored enterprises.


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