Fannie and Freddie Take Over... What does it Mean

Real Estate Broker/Owner with Coldwell Banker Sky Ridge Realty

What does the federal takeover of two mortgage finance giants mean to consumers? 

The government hopes that its plan will bring down mortgage rates by removing doubts about Fannie and Freddie.  Treasury Secretary Paulson hopes to make investors feel confident about buying the companies mortgage-backed bonds.

Jerry Howard, executive vice president and CEO of the National Association of Home Builders (NAHB), today issued the following statement on the government's plan to place Fannie Mae and Freddie Mac into conservatorship:

"While it is unfortunate that we have reached this point, we are hopeful that the government's action on Fannie Mae and Freddie Mac will help to increase liquidity in the nation's mortgage markets and restore confidence in the global financial markets.  At this critical turning point, it is essential that government regulators and all parties involved in the nation's housing finance system work together to rebuild the nation's secondary mortgage market - a move that is absolutely vital to provide affordable mortgages for America's home buyers and to help spur an economic recovery."

What could happen next?

If you are thinking of buying a home or refinancing a mortgage, the government takeover will help stabilize rates.  They might even fall a quarter of a percentage point or so, now that the government has stepped in to make its backing of Fannie and Freddie more transparent.

Rates certainly matter in persuading people on the sidelines to step in and start shopping for a home.  The interest rate you pay for a mortgage depends in part on the rules that Fannie and Freddie set for the kinds of loans they will buy.  Now that they have new bosses in the federal government, the rules could change, but may not change for a few months, until after the November elections.

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