Now the dye is cast, what say ye? I would love to hear from all about their opinions on the Federal Government taking over Fannie Mae and Freddie Mac this weekend! Do you feel it will help us in real estate, help consumer confidence, allow us to return more quickly to a healthy market, lower mortgage rates, or raise them?
My opinion is that there is always more trouble when the government gets involved. Bureaucracy never streamlines a process, it has a way of impeding it. Personally, I see higher rates, and less sales. More importantly I see a lot less consumer confidence in the economy and stocks. The government intervention makes all shares of common almost worthless, and totally worthless if the two companies never emerge out of conservatorship. From what I have read online the largest holders of much of the common stocks are insurance companies and pension funds. What happens to the confidence of their investments? If I lost money on a sure bet, I would be not likely to invest more with the same company. That is a hard sale! The reality is that the shift and the losses will be borne more my the US Taxpayers.
What are your thoughts? We are now living an historical event here!
40 Comments on Fannie Mae & Freddie Mac - Good News Bad News?
Jim,
Thanks for the post. I have my misgivings about this new venture the government is taking on. I expressed concerns earlier today in Measure for Measure at 5.3 trillion in Assets. This will help the creditors of the two companies, but do little for the average consumer.
William Collins, Broker Associate (ERA Queen City Realty) Fannie Mae and Freddie Mac were quasi government agencies that had a free pass to to do what ever they wanted. Publically traded companies have oversight by the Securities and Exchange Commission SEC, Fannie Mae and Freddie Mac had none!
An employee of the federal Government cannot endorse a political candidate under the Hatch Act, but Fannie Mae and Freddie Mac were allowed to lobby political parties. Major accounting errors, bonuses were all given a pass by congress. I have my misgivings.
I wish Fannie and Freddie could be restored to their former structure, with enough regulation to prevent future ventures into loans that are riskier than allowed under their guidelines. I read that half of their losses are from stated Alt A loans that had no business in the GSE portfolios.
As it stands, I think that rates will drop initially because of restored investor confidence and the loss of uncertainty. Plus there are predictions that GSE loan fees may be reduced. MBS's might now be graded with Treasury bonds.
My concern is the future restructuring and the potential for further restricted lending.
Richard Smith Mortgages Home Loans FHA TN GA AL (American Acceptance Mortgage, Inc) Thanks Richard - like I said this is a good news bad news event. From what I read prior to this occurrence everyone said rates would rise. Now they are saying they will drop, but less than perfect credit will pay dearly. I am old enough to realize this is spin and public relations. Friday and over the weekend they said not to worry about stock. Technically...common stocks have not been wiped out, but now are last in line for repayment, and may reduce to $1 a share from a high of $67.39. That is not a good thing in my books. It traded up Friday on spin there would be good news. There wasn't for stockholders unless you are preferred holder..like a foreign Government.
I am not sure what the outcome will be. If we had a crystal ball we'd all be wealthy. The government did what they had to do at this time. Economically our nation is suffering and it can not go on. I think they finally realize that the way real estate goes, so does the economy. I don't know how many of you saw or read "The Economist" several years ago when the cover showed a house as the air balloon and it was carrying the earth (as the basket). Back then because things were going very well everyone realized and acknowledged that real estate actually sets the pace of our economical environment. After all the world was benefiting from the US real estate market at that time. NAR did a study once showing that for every house that sold, tens of thousands of dollars were pumped back into the local community, e.g. contractors employed, appliances purchased, etc. Hopefully, we will see a jump in confidence and an upswing in home sales to help our economy regain its strength. Only time will tell....if we are making the right decision here.
I think this is something that had too happen...too many segments of the economy are intertwined through investments in Fannie Mae & Freddie Mac. But I wouldn't be surprised if it returns to it's former status in 5 to 10 years. You can't predict the future..........
Buchanan, Blue60.com Directory for Real Estate Pro's & IllinoisHouseHunter (Blue60.com & Kettley Realtors) I agree. This was an inevitable component for the times we were in, and the numbers are staggering. It is hard to predict where this will all lead. What no one is talking about however is the component of synergy. How this one act of Government will interact with the stock market, the consumer, the confidence in real estate as an investment, and the impact on credit. This may be a very interesting Fall this year. Stay tuned!
I read a very interesting post by Peter Thompson (I do not put a link not to hijack your post, but you can find him through search, or I will forward it to you it you wish).
Jim, I saw this on Fox yesterday morning, I was hoping some of our more distinguished lenders would write their thoughts on it. I am never happy when the gov't steps in and does a bail out at our expense. But, that is my first gut reaction, perhaps I will change my mind after I read more on it.
Jim: It probably won't help that much initially. We're entering into a slower period of the year for real estate so I expect the results will be felt more in the Spring. I look for an uptick then. As far as rates go, I agree with the other sentiments here. If the market likes the Fannie/ Freddy move, then this may be good for us as far as rates go. Talk to you soon!
Jim, I agree. Government intervention is more bureaucracy and less efficiency. As in most cases, we may need to wait and see whether the results are positiver or negative.
Missy Caulk Ann Arbor Realtor Ann Arbor Real Estate (Keller Williams Ann Arbor) I've done a lot of reading on this, but there is not a lot of substance out there. The spin is that we will see a fix over night, that mortgage rates will drop lower, and home prices will stabilize immediately. The reality will be, how the public perceives this. My opinion is that more money down and great credit will be the preferred way, but that will place a drag on prices. The government weighs things down in bureaucratic red tape.
Paul McFadden (Exact Financial Group) I think you have the right attitude. Next springs market will tell all. In one sense this could be a bottom, but the public will decide that.
As a Realtor, this seems at first glance to be a good thing in that buyers will have access to mortgages and perhaps the perception will be positive. As a taxpayer and believer is small, repsonsible government, I cringe. The federal government allowed Fannie and Freddie to get this bad so we want to trust them to turn it around?
Jessica Beganski, REALTOR {Newington,West Hartford,Glastonbury,CT} (REMAX PRECISION REALTY) I am in total agreement with you. The federal government is a very bad steward of our taxes, and resources. This is part of the reason I do not want bigger government and more taxes. They have not been trustworthy in small things, and certainly cannot be trusted in bigger items.
I agree that governmental oversight really will slow down and potential stop the process of both organizations but I guess the real question is, what would be a better solution? I am definitely of the mindset that to say something doesn't work, means we must have some viable alternatives.
From e-mails I am getting regarding the Freddie/Fannie bail out, I have to admit that the majority are positive about the outcome of this. But as some of you have said, and I agree, it will take a confident public to turn things around. They are predicting an up swing in the stock market and a lowering of mortgage rates shortly. We can only wait and see.
We all reaped the harvest 10 years ago the President ordered the banks to do whatever it took to allow everyone that wanted the American Dream to make sure they got it. He wanted the overall restrictions dropped and they listened....government did create this monster now it stands to reason that they have got to bail this mess out.
I don't like the gov. red tape either, it not only slows things down but it usually messes things up too. Again, only time will tell what the outcome will be, but I do like to think positive and so should you.
Lee Davenport (RE/MAX Around Atlanta) As long as the bailout isn't a political solution we could be in good shape. I agree with you. There aren't a lot of choices and solutions here.
Carol Kope (Keller Williams Realty) I love your response..."Again, only time will tell what the outcome will be, but I do like to think positive and so should you."
Jim, Thank you for bringing so many smart people to your Blog and helping the rest of us figure out this mess. I rarely read every comment but you can bet I have read all of these and I thank all of you for your input! I will stay tuned to get more education. And I don't encourage hijacking blogs but thanks for the links and I always come back to Jim because I learn so much.
The tax payers should then have the right to collect from those who caused the problems or added to them? I don't know about you but just paying for gas is killing my bottom line.
Jim Crawford ~ Atlanta Real Estate-ABR E-PRO Atlanta, GA More about me…
RE/MAX Greater Atlanta
Office Phone: (770) 238-0122
Cell Phone: (770) 664-9516
Email Me
Atlanta real estate broker associate, real estate columnist for www.RealtyTimes.com, real estate speaker. Real estate marketing, Internet marketing for real estate, real estate coaching
Jim Crawford ~ Atlanta Real Estate-ABR E-PRO
Jim,
Thanks for the post. I have my misgivings about this new venture the government is taking on. I expressed concerns earlier today in Measure for Measure at 5.3 trillion in Assets. This will help the creditors of the two companies, but do little for the average consumer.