Fannie Mae and Freddie Mac May Get Support From Feds

The Federal Reserve Board of Governors met yesterday in Washington and agreed to let the New York Fed have final authority to lend to Fannie and Freddie if it proved necessary. Since the Bear Stearns deal with J.P. Morgan gave many people the idea that government-engineered bailouts are the order of the day, this has some folks paying close attention.

Current news this A.M. from several sources seems to indicate that this is good news for a troubled national economy as both the national real estate market and wall street are feeling major shake-ups lately.

This move from the Fed could be a great step to assure that the national real estate market and the associated lending  recovers. With Fannie and Freddie handling a combined $5.2 trillion dollars in U.S. home mortgages, they make up almost half of all the outstanding mortgages.

The U.S. Treasury also said it would look for temporary authorization to buy equity in either Fannie or Freddie to be sure that both have the capital needed to keep doing business and provide a steady stream of money available for home mortgages.

You’ve seen a significant shift in the last year or so as many buyers have found that agency products are the better deal for many buyers — especially first time homebuyers. With the changes this year in increased thresholds for loan limits, the local Boulder Valley area has seen a change in the number of people who are able to get agency loans that could not otherwise due to the higher prices in our area.

It will be interesting to see how this announcement impacts the Asian markets as well as U.S. markets while Freddie auctions debt. I think that having the Treasury show such strong support including increasing the credit line for Freddie and Fannie should have a significant impact, especially if Congress approves the action.


One Response to “Fannie Mae and Freddie Mac May Get Support From Feds”

  1. Michael on July 15th, 2008 5:46 pm

    This bailout of Freddie and Fannie is counterproductive. Another congressional initiative, the Mortgage Bailout, will tax Freddie and Fannie to the tune of $530 million/ YEAR. So Congress wants to bail out an institution and tax it as well? What’s going on? Call your senators/representatives and tell them: Back off the Mortgage Bailout Bill and Back off Bailing out Fannie and Freddie Mac!
    Blue Dog House Contact info:

Got something to say?