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It Looks Like The Shoe Has Finally Dropped for Fannie and Freddie

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Real Estate Agent

It appears the shoe has finally dropped with regard to Fannie and Freddie.  Yesterday, the news media became abuzz with articles revealing the government has conjured a plan to put troubled mortgage Goliaths, Fannie Mae and Freddie Mac under federal control, dismiss their top executives and shore them up financially.

The plan would prompt one of the more sweeping govrnment interventions of financial markets in U.S. history, placing the firms under conservatorship, and empowering the government to restructure and breath new life into the companies.

Stock would be significantly devalued, but not wiped out.  The capital infusion would not be provided all at once, but could be made in quarterly installments, as Freddie and Fannie's losses warrant.

Here is a link to one of the complete stories:

http://www.msnbc.msn.com/id/26567533

 

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Myrl Jeffcoat ActiveRain Signature
  

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Suzanne Champion
N.J. Realty - Westerville Ohio - Columbus, OH

Hmm.  Not sure what to think, frankly...these are odd times...

Sep 06, 2008 12:16 AM
Kathy Toth
Ann Arbor Market Center Keller Williams - Ann Arbor, MI
Ann Arbor Real Estate Experts - Kathy Toth Team

Have you ever looked at the Fannie Mae addendum for foreclosed homes? It is one of the most onerous contracts ever written for the buyer.  I want the government to be involved to see how they actually treat the poor homeowner buyer!  I would love to step in front of Congress and discuss this.

Sep 06, 2008 12:20 AM
Eileen Landau
BAIRD & WARNER, NAPERVILLE - Naperville, IL
ABR, CRS, e-PRO

It's about time!

However, I suspect as reported by the NY times, that the share holders will be wiped out.

I just blogged about this action which I guessed would have happened last weekend as they do things like this on weekends and holidays so as not to "upset" the markets.

Sep 06, 2008 12:27 AM
Charlie Ragonesi
AllMountainRealty.com - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros

I do tnot think the feds should be in this business. But they should do a better job regulating. Thi si what gov't is about not making loans just policing those that do. This is yet another example of the so called freedom loving small government Repuvblicans saying one thing and being Big Brother. I am not sure the  Dems are any better but for sure these guys stink

Sep 06, 2008 12:35 AM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

Suzanne - These really are odd times.  And it is often difficult to know what to think.

Kathy - Yes, I have seen a few addendums on Fannie Mae foreclosed homes.  One of the things that has struck me in recent years, is just how little real protection buyers have, when they are accepting properties "as-is" with no disclosures.  It truly is a "Buyer Beware" arena, and totally insane.

Eileen - Yes, it appears the shareholders will sustain significant devaluation of their interests.

Charlie - I suspect many folks are holding their noses as they put this all together.  It grates on the nerves to know we are bailing out the very entities that got themselves into this situation at everyone's expense in the first place.  However, the alternative of doing nothing (which is our natural instinct), doesn't work well in this situation, where you have so many innocent people being hurt by a situation they are not a party to.  For example, (1) the declination of home values to the neighbors of the foreclosed homes (2) the devaluation of retirement funds, 401Ks, etc, that are invested in REITs (Real Estate Investment Trusts).  This whole debaucle has tentacles that threatens the financial well being of so many Americans, and has become a major travesty.

There has to be regulation, if there is not signicant change, in the way financial markets are overseen, we will be experiencing "deja-vu" all over again, a few years down wind.  The foxes need to be locked out of the hen house.

Sep 06, 2008 01:00 AM
William Collins
ERA Queen City Realty - Scotch Plains, NJ
Property and Asset Management

Myrl,

Thanks for the post. I am not convinced that government should be in the real estate business. I see this as the beginning of even more restrictions for the real estate practitioners.

Sep 06, 2008 01:09 AM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

William - I'm definitely not convinced that government should be in the real estate business either.  As for more restrictions on real estate practioners, I'm not so certain that will happen in all areas of the profession.  But as far as mortgage lending is concerned, I feel the door to the candy store had been left unlocked and wide open these last few years, and a horrible avantage of the situation occurred.

Sep 06, 2008 01:15 AM
Heather the Realtor Orlando, Lake Mary
LemonTree Realty - Orlando, FL
First Time Home Buyers, Bank Owned Homes

I will say some of there policies need a fine tooth comb over them, but completely taking control I am unsure about that. We are in a very interesting time of our US history.

Sep 06, 2008 01:49 AM
Ann Allen Hoover
RE/MAX Advantage South - Hoover, AL
CDPE SRES ASP e-PRO Realtor - Homes for Sale - AL

Hi Myrl!  Thanks for commenting on my post.  I am not sure what to think about this....it will be very interesting to watch, don't you think?

Ann Allen Birmingham Realtor

Sep 06, 2008 11:53 AM
Tracy Santrock
Santrock Realty Group Inc. , - Cary, NC
Raleigh - Cary Broker

I agree! We are in very unusual times.  I'm not sure I agree with another government buyout.  Things should have been handled better over the past few years so we wouldn't have to come to this.

Sep 06, 2008 01:57 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

It's too bad that the government is forced to step in. Perhaps Fannie Mae and Freddy Mac should return to the government sector.

elizabeth weintraub sacramento real estate agent in land parkelizabeth weintraub sacramento real estate agent in land park

Sep 07, 2008 05:20 AM
Anonymous
Anonymous

Heather - Yes, these are very interesting times we are dwelling in.  I think many of us are holding our noses, with all this, while at the same time feeling it is somewhat necessary to protect innocent by-standers and the greater economy.

Tracy - I have reluctance to bailouts too.  Interestingly enough however, I was listening to a radio talk show that deals with financial investing this afternoon (on KFBK).  The host was reminding listeners, that we had bailed out Chrysler a number of years ago using warrants, and at the end of the day the Federal Government got back more than they had funded in the bailout.  The same for Lockheed.  I am not familar with how warrants work, but it is interesting to know, that this process can sometimes pay back as well.

Elizabeth - For those of us in the industry, I think we are all very curious, cautious, and in a state of wonderment, all at the same time!  Only time will tell how this will shake out!

 

Sep 07, 2008 02:33 PM
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