US Fed take control of Fannie and Freddie - Extraordinary Takeover

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Confirming that the Mortgage Crises is far from over, Federal officials unveiled an extraordinary takeover on Sunday of troubled mortgage giants Fannie Mae and Freddie Mac, signaling the most dramatic move to date aimed at shoring up the nation's housing market - CNN Money

Under conservatorship, the government would temporarily run Fannie and Freddie until they are on stronger footing. "We examined all options available, and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection," Paulson said. "The move is intended to prevent major financial turmoil. Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner on housing."

Fannie and Freddie's loans will be managed by the Federal Housing Finance Agency.

Fannie's stock price has fallen about 66% since the end of June 2008 and Freddie has fallen about 69% in the same period. Chief Executives of Fannie and Freddie, Richard Syron and Daniel Mudd have been ousted as part of the takeover.

To highlight how drastic the deterioration of these companies really is, take a look at their capital: Fannie had $47 billion at June 30, according to company filings (They are required to hold $37.5 billion). Freddie's capital stood at $37.1 billion (compared with a requirement of $34.5 billion). Fannie's market capitalization is now $7.6 billion - down from $38.9 billion at the end of last year while Freddie's has fallen to $3.3 billion, down from $22 billion over the same period.

Fannie and Freddie own or guarantee almost half of the $12 trillion in U.S. home loans and the government had been leaning on the companies to help pull the economy out of the housing crisis.


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Jim Crawford
RE/MAX Paramount Properties - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

This is not good news for us in real estate, nor the consumer, and taxpayers.  Higher rates will be in the mix shortly.

Sep 07, 2008 04:05 AM #1
Paula Reno
Astro Realty (Buyer Agency) - Cedar Lake, IN
Broker, Owner - Cedar Lake Indiana Realtor, Astro

I completely Agree,  Paula

Sep 07, 2008 04:11 AM #2
Randall Schrader
Competitive Insurance of Dundee - Dundee, FL

I think rates will go lower, actually.  After the election and the first part of next year, all bets are off.

Sep 07, 2008 04:11 AM #3
James Miner, Esq.
Law Office of James Miner LLC - Westfield, NJ

This could actually be very good news.  Anything that brings certainty and stability to the mortgage markets can only help. 

Sep 07, 2008 04:15 AM #4
Palm Springs Realtor Stewart Penn
Bennion Deville Homes - Palm Springs, CA
Bennion Deville Homes - Broker Associate

Shareholders had all the upside opportunity without the risk, since the US Treasury is now having to bail out these businesses, with taxpayers having to pick up the bill - estimated to cost as much as $100 Billion.

Sep 07, 2008 04:16 AM #5
Nancy Larson
I am a licensed referral agent in NJ - Hutchinson Island, FL

We shall see. I just can't wait to go to work Monday for the emails. What concerns me the most, is what will I be able to offer the consumer.

Sep 07, 2008 04:21 AM #7
Edward moloney
Edward Moloney Loan Officer GMH Mortgage Services - Holliston, MA
Loan Officer Providing 5 STAR SERVICE

My thought is business will stay the same. Keep in mind the goverment runs FHA programs and USDA programs

Sep 07, 2008 04:24 AM #8
Scott M. Stulich
Signature Realty Group, LLC. - Dundalk Sparrows Point, MD

NOT GOOD I AGREE.....................................

Sep 07, 2008 04:25 AM #9
Aida Pinto
United Associated Brokers - Downey, CA
Real Estate Broker (562) 916-3237

Nancy--you hit the nail on the head: "what will I be able to offer the consumer." 

Sep 07, 2008 04:25 AM #10
Rich Dansereau
Positive Real Estate Professionals - Knoxville, TN

I am disgusted by this bailout! The federal government will bail out two of the central players that ushered in this debacle. They determined the guidelines and accepted the risk and now they need bailed out. I really am amazed that the government will bail out these companies and not help the homeowners. The government's claim that they might get all, some or none of their bailout money back is a pipedream; once loaned that money is down the rabbit hole. The money belongs to the taxpayers, help the taxpayers. This won't stabilize the market, that assertion is a red herring. Sorry for the rant but this decision and the misleading reasons for it really anger me.

Sep 08, 2008 03:47 PM #11
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