...is that it asks the wrong question. The issue is not what would happen to rates without the Fed backstop to Fannie/Freddie, but whether there would be fixed rate mortgages at all.
30-year-fixed rated-80-percent-loan-to-value mortgages beyond the conforming loan limit basically do not exist at the moment [update: by conforming loan limit, I mean the high cost area loan limit, which in some places is now $729,750]. A conversation I had today with two bank executives confirmed this. Some would argue that 30-year fixed rate mortgages are over-rated, but not I.
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