Do GSEs help make housing affordable?

Reuters is reporting the GSE Mortgage limit raised to $417,000 for 2006.

U.S. mortgage finance regulators on Tuesday raised the limit for loans that can be bought by government-sponsored mortgage enterprises Fannie Mae and Freddie Mac to $417,000 for 2006, in most areas.

Stephen Blumenthal, acting director of the Office of Federal Housing Enterprise Oversight (OFHEO), announced the rise in what is called the conforming loan limit for single-family mortgages purchased by Fannie Mae and Freddie Mac. The 2005 limit is $359,650.

Excuse me but I have a few of questions:

• Weren't we trying to limit the mortgages going to Aunt Fannie and Uncle Fred?
• Wasn't the whole point of Fannie and Fred to make "housing affordable"?
• Aren't Fannie Mae's books still so screwed up that they can not make heads or tails out of their derivative mess?
• Shouldn't Aunt Fannie at least have to get her books in order before we start raising loan limits on conforming loans?

It seems to me that the mission of Aunt Fannie and Uncle Fred has been long lost. One of the reasons housing is not affordable is there are 280 active Federal bills to "make housing affordable".

By charter, the GSE mission is to provide liquidity, stability and affordability to the nation�s mortgage markets. Well we sure have witnessed (for now) success on the liquidity front, but as for price stability and affordability I doubt the failure could possibly have been any greater.

If anyone really wants to make housing affordable, they should scrap nonsense about the "ownership society", eliminate the housing deduction, cancel 280 government programs to "make housing affordable", not cut interest rates to 1% in a silly panic, and with tears in my eyes (I am a sentimental kind of guy), finally bury Aunt Fannie and Uncle Fred.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/