Fannie and Freddie: The Fed’s to the Rescue
July 15th, 2008 Categories: Real Estate News
The Federal Reserve and Treasury Department step in to help Fannie Mae and Freddie Mac… Was it enough?
Let’s take a moment to understand what all the fuss is about…and what affect will it have- or is having on Charlotte mortgages?
#1. Fannie and Freddie are HUGE! Their combined portfolio of loan guarantees = $5.2 trillion.
#2. Rising foreclosure numbers = BIG losses for Fannie and Freddie!
#3. If people aren’t confident in Fannie and Freddie’s stability, they won’t invest in the bonds they guarantee.
#4. If Fannie and Freddie can’t sell bonds (I’m going home) and mortgage banking/brokering in America is done.
Banks depend on Fannie and Freddie to replenish their funds. If lenders have to hold a mortgage forever, there would be VERY limited funds in the market and you would have to own a bank to qualify! The VERY good news is that this isn’t a subprime issue– Fannie and Freddie are very small players in sub-prime, but their exposure is still large because the sub-prime mess is driving everyone’s property values down.
What the government did solve much of the problem. By allowing Fannie and Freddie access to emergency cash “if needed” and even saying the U.S. would purchase ownership interest in them “if needed”, they gave bond investors confidence again to buy those bonds.
The first test came early… there was a Freddie Mac Bond Auction scheduled for this morning. They sold like hot-cakes!! Investors ate it up and $3 Billion in bonds sold for more than expected. These is great news for us in the immediate because the mortgage bond market is what determines interest rates. The long term outlook is harder to judge because Fannie and Freddie are back to business, but business still isn’t very good. With both companies losing billions, it will still take time for the stock prices to recover and for the companies to post a profit.
VA, FHA, Conventional Loans, Jumbo Loans– these Charlotte mortgages are our strengths, call me and I’ll discuss your options, and help you get started.
Olan Carder
Your Charlotte Mortgage Specialist
Myers Park Mortgage
980-721-7478
www.charlottemortgageonline.com
olan@myersparkmortgage.com
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