Fannie, Freddie and Foreclosures

It appears the Federal Government will be taking over Fannie Mae and Freddie Mac. What’s happening to these two pillars of the mortgage industry is indicative of the real estate market as a whole. Too many consumers who could not afford homes, bought them in the early 2000’s which created this situation.

Although Fannie Mae and Freddie Mac did not purchase high risk adjustable rate mortgage products, the overall impact of the sour real estate market is now taking its effect on them.
Foreclosure rates are still on the rise as well, meaning that more consumers will lose their homes and loans will go unpaid.

We’ll keep our eyes on the Federal bail out plan, which now, will include running Fannie Mae and Freddie Mac.

The only potential upside to a Federally operated Fannie Mae and Freddie Mac, is the potential for lower interest rates.

If interest rates drop below 6%, buying activity could be generated. However, sellers will have to keep their homes priced according to market conditions.

No one has a crystal ball and can predict when this slow cycle we are in will turn around.

Some say another year and perhaps all of 2009. Signs of a reversal will be more transactions, less inventory, price increases for active listings and less foreclosures.

One thing is for sure, the breaking of Freddie Mac and Fannie Mae is a clear sign that things need to change, and will. We’ll see how this impacts the industry in the coming weeks.