A press release today from the Office of Federal Housing Enterprise Oversight announced that Fannie Mae and Freddie Mac will be allowed to spend more of their capital earnings. The Real Estate Journal has a great article that goes more in-depth about “why” this is so important and “what” some of the potential implications will be. But the real question is: how will this impact the mortgage originator and the home-owner?
In regards to Originators, this is nothing but good news. The increased financial flexibility for Fannie and Freddie will increase the liquidity in the market which should in-turn, lower interest rates. Why will that happen? Well, ultimately it allows Fannie Mae and Freddie Mac the ability to invest in more mortgages themselves, as well as allow them to guaranty more loans too. It is presumably going to impact the Jumbo-loan sector as well as the now defunct sub-prime segment of the mortgage market.
For homeowners this is great news as well. With Fannie and Freddie allowed to use their liquidity in the mortgage arena, we can expect to see increased offerings as mentioned above. It should also allay concerns for those people who thought big business was going to turn it’s back on homeowners. Obviously, solving the housing market crisis is everyone’s #1 concern.
The great news here is that seemingly everyone is doing everything, and anything to straighten out this mess. Most bloggers will say that this help has either come too late, or shouldn’t be coming at all. I think that when private enterprise gets into trouble, they should be allowed to do what they can to clean the mess up.
Below is a link to CNBC’s video coverage of the story, hat-tip to JF for his help:
http://www.cnbc.com/id/15840232?video=689319687
Tags: Fannie Mae, Good news, Mortgage Market
March 20, 2008 at 3:37 pm |
Good story… keep ‘em coming.