Fannie & Freddie Seizure To Help Mortgage Rates!

Some of you may have heard Fannie Mae & Freddie Mac are now under the control of the government and more specifically the Federal Housing Finance Agency. Another bailout? YES, however the decision making and "strings" behind this one were necessary. Fannie Mae & Freddie Mac guarantee almost half of the mortgages on the secondary market, therefore a collapse to these giants would have spelled "lights out" on the already shaky housing market.

The simple fact is these two companies were in big trouble and everyone in the room with the exception of the two most influential men; Fannie's CEO Daniel Mudd and Freddie's CEO Syron were aware of it. By the way Mudd and Syron will more than likely be dismissed from there positions but don't worry Mudd could receive $9.3M in a severance package and Syron $14.1M. Fannie Mae & Freddie Mac rely heavily on the selling of their bonds to finance the one's about to mature (i.e. mortgage loans). However Fannie & Freddie have found extremely difficulty in the market's appetite for their bonds given the ailing housing market. So to further enhance buyer's interest they began offering higher yields however they couldn't just go back and hike the interest rates on their portfolio to cover the increased payouts and this resulted in further profit losses. The end result a government bailout and more than likely up to $100 billion in each firm to keep them afloat and liquid.

This will be BIG for interest rates moving forward as we have already seen rates come down by up to .50%. Why? Now that the government is involved the bonds that Fannie and Freddie ensure are basically prone to zero risk with a very good rate of return. Much like the T-bills offered only with much greater returns! This has prompted gross buying from U.S. companies, foreign investors, banks and some private entities. I truly see this rally being sustained and really helping mortgage rates moving forward!

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker