Making an opportunity out of Fannie Mae and Freddie Mac

Here's a Very Important and Timely Message... On How You Can Use the Current Situation With Fannie Mae and Freddie Mac as an Opportunity to Create Urgency With Your Clients...

I recieved this email this week the contents of is so important that I decided to post it. Please take the time to read carefully because I believe this challenge is an opportunity to you and your Clients and Prospects...

We had another financial issue in the last week that has, and will, influence the real estate market now and in the future. With the government stepping in to aide, prop up, or potentially take over Fanny Mae and Freddie Mac, we are seeing another challenge hit the financial markets like the subprime meltdown we saw a little over a year ago.

This recent financial problem was forecast some months ago by many in the financial sector, so the news is not as abrupt as the subprime issue. It will still create uncertainty in the marketplace. I view that uncertainty as an opportunity to position yourself as an expert, demonstrate your value, and build urgency in buyers and sellers.

We need to educate the public on a few issues in the next week:

1. What role Freddy Mac and Fannie Mae play in the housing marketplace.
2. What percentage of loans this will affect.
3. How these challenges might affect buyers.
4. How it might affect sellers.
5. How it might influence the overall marketplace.

There is no question that consumers have no clue what role Fannie Mae and Freddie Mac play. I would even venture to guess and say many Real Estate Agents don't know as well. Their role is significant, as they buy more than 50% of the loans in the United States. You read that right over 50%!

We need to explain to buyers and sellers that their Bank or Mortgage Company will most likely sell their loan to Fannie or Freddie. The reason is that most Banks feel that the business of originating mortgages; charging points, fees, etc. is more profitable and with less risk than holding the mortgage for the term of the loan.

If the Banks and Mortgage Companies can't sell the loans to Freddie Mac or Fannie Mae or others like themselves, they will be out of business with no new money to loan.

If you have buyers on the fence or with low urgency, you can use the challenges with Fanny and Freddy to let them know money is available now. The concern is will it still have the same availability in the future? That point is uncertain and why the government stepped in to help. There could be some stipulations placed on Fannie or Freddie by the government to insure solvency and protect our investment as tax payers.

I do not believe Freddie or Fannie are going down, but I do believe change will happen due to the marketplace or government intervention. Others will step in to the void in business if Fannie and Freddy are forced to pull back, but in the interim we could hit a rough patch. To avoid the rough patch, buyers need to understand money costs, availability, and credit will most likely remain the same for at least 30-45 days. The message is, buy now!

For sellers, due to this challenge, the pool of buyers they are trying to attract might be the largest they will see for the rest of the year. If tightening happens with credit and money, it will force some buyers out of the market due to an inability to secure funds.

If the pool of buyers is affected, that could trigger a further tightening of the values and prices in many local markets across the country. I am not predicting, merely stating there is a possibility that exists.

The message is, position yourself well for this pool of buyers. Sellers need to reduce prices, improve condition and curb appeal, and stage their homes. They must be the most competitive they can possibly be given the risk factors that just went up in the marketplace due to Fannie and Freddy.

Let me make another statement as to the media reporting the interest rate reductions due to this. While we have seen reductions in interest rates since the weekend, that seems to be a quick market response. The drop will happen when competition increases, which will take some time for companies to ramp up. The stance that buyers should wait for interest rates to go down is unwise. When have you ever seen the government step in to help and it ends up costing less money? The most likely outcome is it will cost more!

Dirk believes it is time to inform clients and prospects of the possible challenges ahead. The goal is to inform them of the landscape, share with them your observations and expert views and conclusions. Don't force your views on your clients and prospects. Merely give them facts, history, and logic and see if the urgency to act changes. Ask them, does this alter your views, timeline, or intensity to act? Do we need to seize this opportunity?

Whether they agree with your conclusions or not, they will respect and appreciate you informing them of the marketplace and how it affects them.