Govt backing Fannie Mae and Freddie Mac?
Written By: admin on July 13, 2009
One Comment
"WASHINGTON – The government is expected to take over Fannie Mae and Freddie Mac as soon as this weekend in a monumental go designed to protect the mortgage market from the failure of the two companies, which together hold or guarantee half of the nation’s mortgage debt, a person briefed on the matter said Friday night. " AP
If a person has a mortgage backed by Fannie or Freddie, does this affect them? Would it affect a homeowners ability to refinance through the FHA streamline refinance program?
Thanks!
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It will not affect any loans they hold that are insured by them.
Both Fannie Mae and Freddie Mac are more like a "bank" for mortgage companies.
Local mortgage companies write loans and re-sell them to others.
Investors, invest in Fanny and Freddie and make interest off their investments, paid by your mortgage payments and interest paid on your loans. Money from investors is used to buy up the "notes" for homes sold by others.
If Fanny and Freddie go bankrupt, due to buying too many "shaddie" loans, or loans from buyers who defaulted, then you’d still owe your debt, but to whomever bought the bankrupted companies.
In this case, since the federal govt hold the "contract", guaranteed the Feddie and Fanny securities, it’s Uncle Sam who will become the owner, since the chief executives and board that was in control, mismanged their trust.
They did not properly supervise, or monitor the mortgage companies, from which they bought mortgage securities.
The tax-payers will be responsible for paying investors, or making up losses and keeping Freddie and Fanny afloat.
If not, smaller mortgage lenders and banks could not keep making loans.
Without Freddie or Fannie’s "sucking up" of loans, and paying back the bankers and mortgage lenders, then the small guy looking to buy a home, would either not be able to get a loan, or would pay extra high interest rates to guarantee more "risky" loans.
Had the Bush administration in past 8 years, and the Department of Commerce paid more attention, had the economy been better, and unemployment rates hadn’t risen to now about 6 percent, this crisis would not have happened.
Poor government, government that doesn’t believe in enforcing sound regulations, leads to greater problems for both business and the consumer. Like lead in children’s toys from China, another example of mis-management, among others.
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