Fannie, Freddie and you
As expected, the US Treasury has seized control of Fannie Mae and Freddie Mac. The obvious question, what does that mean for you.
Actions by the Treasury were meant to stabilize financial markets and ensure mortgage availability and affordability. Mark Zandi, Chief Economist at Moody's Economy.com said, "Effectively, the federal government has now become the nation's mortgage lender. This takes a major financial threat off the table." He notes that 30 year mortgage rates, currently averaging 6.35% nationwide could dip to 5.5% because investors will be more willing to buy the debt issued by Fannie and Freddie - and at lower rates - since the federal government is now explicitly standing behind the debt.
The bottom line, increased mortgage availability at possibly lower rates which should help the real estate and housing industry while increasing buyer confidence hopefully spurring demand.
As to shareholders in FNM and FRE, as they say in New Jersey, fuhhhgettttttabouttttttttttit. But stocks and especially financials soared on the news. And if you are a taxpayer wondering about the cost of the bailout (and I don't know why I just typed IF), Secretary of the Treasury Hank Paulson said, "we obviously don't know" and it will depend on how quickly the housing market turns around.
Read more at Yahoo! news or from Reuters.