Freddie Mac and Fannie Mae seized - good night or see you in the morning?
The U.S. government seized FHLMC (Freddy Mac) and FNMA Fanny Mae) two of the nation's largest financial companies, which have been funding approximately 75% of new home loans. Fannie and Freddie, government-chartered, shareholder-owned firms have lost approximately 90% of their value on fears of losses from mortgage defaults.
The CEO’s of both have been fired.
This intervention marks the failure of the public-private experiment that was created to boost home ownership among Americans. Fannie and Freddie were created by Congress to help prop up the housing market though the companies have long been owned by private shareholders. The government has seized control of the vast bulk of the secondary market for home mortgages, and will pledge up to $200 billion in additional capital. Obviously, this is bad news for shareholders as the common stock will be diminished. And we don't even know how much this will cost taxpayers.
It is anticipated that the government conservatorship may result in (slightly) lower interest rates. The market is all over the place this morning as bond investors try to sort out the implications. Currently, the 30 year fixed rate, with no points, remains at historic lows in the low 6% range.
The CEO’s of both have been fired.
This intervention marks the failure of the public-private experiment that was created to boost home ownership among Americans. Fannie and Freddie were created by Congress to help prop up the housing market though the companies have long been owned by private shareholders. The government has seized control of the vast bulk of the secondary market for home mortgages, and will pledge up to $200 billion in additional capital. Obviously, this is bad news for shareholders as the common stock will be diminished. And we don't even know how much this will cost taxpayers.
It is anticipated that the government conservatorship may result in (slightly) lower interest rates. The market is all over the place this morning as bond investors try to sort out the implications. Currently, the 30 year fixed rate, with no points, remains at historic lows in the low 6% range.
"The chiefs of the nation's two largest mortgage lenders reaped roughly $30 million in salary, incentives and other perks last year, despite setting their banks on courses which now may require government bailouts." Read it here: http://abcnews.go.com/Blotter/story?id=5413172
Delighted they were both "canned" just sorry they couldn't be "tarred and feathered"
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Amazing!!! Thanks for sharing!
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I think this pretty much sums up the state of affairs when it comes to the
real estate market and home foreclosures. Home foreclosures are on the rise
still, as those who were able to hold out are starting to feel the pressure
of the slowing economy. With the recent debacle at the federal level
concerning Fanny Mae and Freddy Mac... this is going to be an issue for a
long time coming. Now the mortgage companies are in so deep that it will
take a long time for these lending institutions to recover. But we would
never be in this mess if people weren't overspending their means.
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