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Fannie and Freddie set for new era
Brazil News.Net
Monday 8th September, 2008
The US government's historic bailout of Fannie Mae and Freddie Mac could lead to lower mortgage rates.
But home owners who are already behind on their mortgage payments, will have to wait for relief from Federal Reserve interest rate cuts.
By placing Fannie and Freddie into a conservatorship, the government is promising investors that the companies' debt is safe.
Fannie Mae and Freddie Mac play a critical and increasingly dominant role in the mortgage market.
The companies buy mortgage loans from banks and package those loans into securities.
Fannie and Freddie own or guarantee about $5 trillion in home loans, about half the nation's total.
Financial analysts have greeted the government decision with relief, hoping that if mortgage rates fall, more potential buyers will be attracted into the market, which, in turn, will help to prop up home prices.
It is thought mortgage rates on a conventional, 30-year fixed-rate home loan will fall over the next few weeks.
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