The Treasury department is now committed to support Fannie Mae and Freddie Mac with as many billions of dollars as is necessary to get them through the next few years. There'll be no limit whatsoever anymore.
the Obama administration is writing a blank check, the significance of the move for real estate is potentially huge, for several reasons.
Fannie and Freddie provide funding for well over half the U.S. mortgage market -- making home sales and purchases possible for hundreds of thousands of consumers.
The fact that the two companies have an explicit, full faith and credit backstop from the U.S. Treasury means that Fannie and Freddie can borrow in the capital markets at more favorable rates. Those lower costs of capital can then be passed along - at least in part - to home loan borrowers in the form of lower interest rates.
Finally, a key reason for the policy change - which also included permission for the firms to retain larger mortgage-asset portfolios - is to help Fannie and Freddie provide deeper loan modification assistance to greater numbers of seriously troubled borrowers.
Both companies are now expected to reach out and offer loan principal forgiveness to delinquent and underwater home owners - something that the current Obama loan modification program does not permit.
With the huge backlog of homes in the pipeline ready to be foreclosed -- this sure could help with
stabilizing supply and demand in the resale market!
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