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Fannie Mae and Freddie Mac: Doomsday of the Financial World?

Many have inquired about my take on the government's takeover of Fannie Mae and Freddie Mac, even some in the media. I had been sitting be the wayside, actually taking care of business, and had set the issue on the back burner, until now.

Just why in the heck did the government take over Freddie Mac and Fannie Mae? And is it all for the better,or worse?

The obvious reason the government wanted to take over these two mortgage behemoths was to calm the markets, even to indirectly send mortgage rates lower in another feeble attempt to spur the housing market. After all, all other attempts failed, why not calm the mortgage backed securities market's fears by backing the money by the government?

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Posted by Florida's #1 Mortgage Planner on 09/12/2008 11:06 AM

Comments (9)

fannie mae, freddie mac, florida mortgage

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9 Comments on Fannie Mae and Freddie Mac: Doomsday of the Financial World?

SEP

2008

The hand was forced and they had to do it to save the houseing market and the economy. They also had to put in another $100 Billion. It just had to be done to justify adding more "Tax payer dollars!"So, again, the taxpayers have to bail out the world investers whom are afraid to get anywhere near the houseing market or anything that has to do with houseing such as construction, supplies and consumables that have to do with building and remodeling.

Doomsday would be if Fannie Mae and Freddie Mac fail, an event that the Feds would never allow due to pressure from foreign investors who finance our debt.

I totally agree Bob... the government wanted to take over these two behemoths to calm the markets and send mortgage rates lower. This was a feeble attempt to spur the housing market. Why not calm the mortgage backed securities market's fears by backing the money by the government?

Hey, While I'm at it . . . what is the general sales climate in your area? Here in Hawaii, prices have still not dropped appreciably enough to motivate Buyers to jump in. OK . . . have a good week-end.

Aloha

Jim

So, where is the dramatic drop in rates? And will it spur consumers to start buying houses again? I still get calls from clients that want to pay $175K to $200K for a bank owned property valued at over $800K. They say becasue the bank took it in a foreclosure they need to sell it off at a big loss. That obviously is not the case. And now that the government is bailing out Freddie and Fannie, will we see less and less short sale and foreclosure deals?

Since the consumer mind set has been based on getting a great deal and waiting (procrastinating)for a better deal, how long before they come back?

Robert,

"Just why in the heck did the government take over Freddie Mac and Fannie Mae? And is it all for the better,or worse?"

Because they could!

The bureaucrats and the socialist in Congress, love the newly sized power!

HUD/FHA now has 30% of the market, Fannie Mae and Freddie have about half, only God can help the connsumer!

Bill

Robert.... I respect some people, just not sure why it's such a bad thing that FHA has taken over 30% of the market share now. Something that I have been preaching for several years, that it should have had more market share in the past years. But other loans were made easier, even though in many cases, it was not the best decision for the consumer. I just had to get that off my chest.

But to go back to your post? I just has this conversation with someone the other day. Yes, they took over these two to calm the markets, to get rates lower. And they did become lower, much lower.

@ Chuck.... are you asking that qquestion, because you don't think they were lowered much? Ouch... they were much lower. Almost to the same pricing that we had back in January, except that they still have higher add-ons when it comes to credit scores.

But as I told this other person... mark my words, they will be back up by mid next week. I know this for a few reasons. For one, it doesn't help our economy all the time & our market can't withstand this. It doesn't always put spending back into the market. That can be done with just overall positive news with the economy in general. And look.... we had a few pricing corrections for the worse today and this week. I'll see where my statement holds up about rising rates in the next 3 days. Any bets?

Jeff Belonger

Jeff,

It's not FHA's 30% that worries me, it's that Congress and their bureaucratic minions now control 80% of a market they don't understand.

Robert, please forgive us. It's an on going debate. With FHA once again flourishing Jeff's arguments, always good for some consumers are looking good to many more. Both,our concerns are the consumer, I just don't believe in governmental involvement.

Bill

Bob, i dont know that there was a choice. Paulson, i think at least, has done a great job keeping govt out as long as possible.

No one wanted this step, but I think since folks like PIMCO had basically said they are not buying any more [a sentiment of many] that we were close to seeing a big big train wreck.

the question will be can govt step out once they have stepped in. They did a decent job with the S&L in 89-90... can it be repeated?

chris the implementer

SEP

2008

Jeff it was basically a statement of where is the dramatic drop in rates. I totally agree that we're back to what we saw in January. But I still wonder if it is enough to bring back the consumer. And the credit requirements have changed to make it harder. FHA is not even really looking at 580 to 620 anymore unless they have nothing better to do. Bancruptcy went from 2 years to 3 years.

Alot of consumers think we haven't seen the bottom yet of prices or rates. And that makes it kind of scary that the media is still hooked on the "we know it is going to get worse", because we like to assume we know everything. So the media is fueling the drop.

The media just doesn't realize or want to be responsible for the way they manipulate people. I believe the media made it worse than it should actually be.

A few months back a reporter on the Today show was explaining charges on the GFE. She stated "What the heck is an Origination fee" don't pay that! And "what is a processing fee"? "of course they are going to process your loan" don't pay that! Seems to me that it was very badly done if she didn't even spend the time to research and report on what the fees really were for. The next day I had a client that was in the middle of a transaction that called to tell me they were not going to pay that fee....but then was ok with it after I had explained it to him.

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