Trouble for Goliath?

In the wake of the failure of such giants as Countrywide and Washington Mutual, no one expected this past week to see Indymac Bank join the ranks of failed mortgage institutions. Federal regulators shut down IndyMac last Friday. The bank’s assets as of the end of the first quarter 08 were over $32.01 billion, making it one of the largest Lendors in the nation.

The Federal deposit insurance corporation has taken over the bank which it described as the "fifth FDIC-insured failure of the year." Indymac reopened Monday under management of the FDIC.

But more startling and perhaps disturbing is the potential failure of Fannie Mae and Freddie Mac. Fannie Mae was created during the Depression as a way to revive a collapsed housing market by providing mortgage guarantees to low- and middle-income Americans.

Today they own or guarantee a mind-boggling $5 trillion in loans, which is why the fear that they could go under is so important. Fannie Mae or Freddie Mac usually purchases home loans as packages from banks. Your home loan could be one. If Fannie Mae and Freddie Mac were to fail, analysts say mortgage rates would soar, mortgage lending would grind to a halt and borrowers of all kinds would pay higher rates, negatively impacting the already sluggish economy and real estate market. 4
The Bush Administration met over the past weekend to explore options to prevent any failure of the mortgage giants.

Senator Chris Dodd, trying to calm fears, says there is no crisis and no bailout is necessary. Quote "The economics are fine in these institutions, and people need to know that." End quote

It is truly an interesting time for the real estate industry.