Saturday, July 12, 2008

How Freddie/Fannie Fallout Could Affect Main Street -

If you're wondering "Why would Mike post this?", you have to realize that what happens to Freddie and Fannie trickles down a long way. Those scatologically inclined know what runs downhill. Most of us don't live on the financial mountaintops, this is going to affect us. Let's see how, read on:

Published: July 12, 2008

The stock market swoon over Fannie Mae and Freddie Mac this week has left many consumers scratching their heads, wondering if buying a home is a worse idea than it was seven days ago or whether to take down the “for sale” sign in the yard.

So now is a good time to step back and assess the landscape.

Thus far, the biggest damage has been mostly to Fannie’s and Freddie’s investors, though the overall stock market has recoiled as the companies stumbled. In the housing market, consumers are still moving into new homes, and people continued to close on new loans Friday.

But if you are shopping for a home or a mortgage or considering selling a home, you may wonder what will happen next if things get worse for Fannie and Freddie. Will mortgage rates rise, and home prices fall further? Could the troubles affect the rates you are charged for other loans? Answering these questions starts with a brief (I promise) primer on what the two entities do and why they’re important.



lindyasimus said...

Yes Main Street and Everyman will be affected. The point in the article about a 1/4 point increase in interest is well made. Unless lending institutions and the people who borrow for them begin to attend to the question of Servicing capacity - that is the ability to actually keep paying the loan over the life of the loan, rather than the capacity to borrow the get INTO the loan, then the problems will continue.

Just wanting to be able to afford what one wants is not the same thing as being able to afford it.

Genevieve Hinson said...

We bought our first home a year-and-a-half ago. By then housing had dropped about a 100k already in this area.

No fun watching it lose value today, but also have no intent to move for another ten years (or more!). So hopefully it'll be on an upswing by then ...

However, many people I know are affected by these upside down loans. Modesto, CA was one of the worst towns in the nation (I believe). For the life of me couldn't figure out how folks with my sized income were buying 400k+ homes ... now we know.

The scatagorical affect for everyone with Fanny Mae and Freddie Mac ... :(