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Fannie Mae and Freddie Mac Buyout - Good or Bad for buyers and sellers in Steamboat real estate market?
I have learned that if I want exciting things to happen in the mortgage world, I should have a baby! One of the largest government expansions in history occurred on 9/8/08. The Treasury seized control of the Government Sponsored Enterprises (GSE), Fannie Mae (FNMA) and Freddie Mac (FHLMC). First, let me go into a little bit of the background. FNMA and FHLMC purchase mortgage loans from originators so that the lenders can continue to make more loans. The GSE's then package the loans into securities and then sell the securities. The amount of mortgage backed securities is $5.4 Trillion which is equal to the total of all publically held debt in the US. The GSE's market share is about 80% of all loans originated. Overall, they are huge, and in most economists opinion, too large. The GSE's are essentially a very large hedge fund.
Imagine what would have happened if FNMA and FHLMC were allowed to fail? It would have been catastrophic for the US economy and the present and future of mortgage lending. At the least, all mortgage loans would have increased in rate drastically, making borrowing almost impossible for many buyers. The takeover may also help maintain confidence in mortgage backed securities. It will be exciting to see what happens down the road.
What does this mean for you? First, rates have improved because of the renewed confidence in FNMA and FHLMC. It may be a great time to refinance. Refinancing could save you hundreds of dollars a month. We have a spreadsheet that compares your current loan with scenarios on refinancing. Second, mortgage loans will continue to be available for those who qualify. I would love to meet with you to discuss ways to prepare you for your future mortgage needs. Please call me if you have any questions or would like us to put you on our rate watch list.
Article compliments of:
Kathryn Pedersen, VP
Yampa Valley Bank Mortgage
kpedersen@yampavalleybank.com
970-875-1609
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