Fannie, Freddie and Forclosures

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 mess.

Although Fannie and Freddie did not purchase the high risk adjustable rate mortgage products, the overall impact of the sour real estate market is now impacting them.

Foreclosure rates are still on the rise as well, meaning that more loans are going bad.

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

The only potential upside to a federally operated Fannie and Freddie, is perhaps the lowering of 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 we’ll be out of this slow cycle. Some say another year and perhaps all of 2009.

One thing is for sure, the breaking of Freddie Mac and Fannie Mae is not a good thing. We’ll see how this impacts the industry in the coming weeks.