Looks like the end is here.
It is speculated that the Fed will backstop Fannie and Freddie this weekend.
How will this affect Mortgages?
Some believe the backstop will help add liquidity to the mortgage market and equate to slightly lower rates. With the extinction of Subprime lenders and the absence of Alt A lenders, Conforming and FHA loans have been the mortgages of choice over the last year.
Will this truly help?
Given the already strict Conforming and FHA guidelines, this will most likely not imidetly fill the void of Subprime and Alt A mortgages.
How will it affect investors in the two?
The already quasi entities could leave investors empty handed in the end. Coupled with the devastating effect to scores of investment, banking and insurance companies that hold billions of dollars in their preferred shares. Details on the monumental event are scarce.
Fannie Mae was created by the government in 1938, and was turned into a shareholder-owned company 30 years later. Freddie Mac was established in 1970 to provide competition for Fannie.
Ultimately what does this do to a Free Market?
The move could cost taxpayers billions.
Also reported Friday by the Mortgage Bankers Association that more than 4 million American homeowners with a mortgage, a record 9 %, were either behind on their payments or in foreclosure at the end of June.
It is estimated Fannie and Freddie, which together hold or guarantee $5 trillion in mortgages estimated at almost half the nation's total.
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