The takeover ...
On Sunday the government took over Freddie Mac and Fannie Mae, the government-sponsored companies that buy mortgages from lenders because their mission is to promote homeownership.
It will take awhile for things to shake out and to find out exactly what’s going to happen. For instance, will this action result in tougher lending rules, and will shares in the companies be entirely wiped out so investors lose everything?
One thing is certain -- taxpayers will be footing the bill to clean up this mess.
The New York Times reported the takeover is expected to cause mortgage rates to fall a bit, possibly up to a percentage point, which could help spark some real estate sales. The takeover may also prompt a review of loan qualifications, because Fannie and Freddie set rules for what types of loans they will buy from lenders. So it may get tougher to get a mortgage. However, if you already have a fixed-rate loan that was acquired by one of those companies, nothing will change.
A conservatorship will be set up to take charge of the companies for now. Several things could happen after that, according to a Sunday Globe article by Robert Gavin and Kimberly Blanton. In the long-term, Freddie and Fannie could be returned to their part public/part private status; they could be privatized; or they could be taken fully public.
What are your concerns on this matter? I suspect many of you are upset taxpayer money will be used. Does anybody think this will help the housing market, or is this event something that will just make buyers more nervous? And does anybody think the companies should be fully privatized, a position recently advocated by former Fed chairman Alan Greenspan?
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