I guess that I'm not the only one working on a Sunday.
Today, Treasury Secretary Henry Paulson announced the anticipated plan for Fannie Mae and Freddie Mac, which own or guarantee about $5 trillion in home loans, about half the nation's total. An alarming number of those loans have started going into default, draining the companies' financial reserves and sending a chill through credit markets worldwide. As investors grew more nervous, borrowing costs started rising.
For homeowners behind on their mortgage payments, or who owe more than their homes are worth, this plan doesn't offer much help, but it will be good news to homebuyers and some homeowners hoping to refinance if it leads to lower mortgage rates, as experts expect. Falling rates...by as much as 1/2% in the next few weeks...should attract more potential buyers into the market.
Maybe government control will allow the companies to focus on their mission of supporting the housing market. The Federal Housing Finance Agency, the new agency created by Congress this summer to regulate them, is planning to work with the companies on loan modification efforts and to report on their results in the coming months. Most mortgage brokers expect Fannie and Freddie's lending standards to remain unchanged, with tight requirements on buyers' credit, but some of the extra fees that have been passed on to buyers may be reduced.
Just remember, the costs for all this, estimated at tens of billions, will come out of taxpayers pockets.
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