Fannie Feddie Take Over information for Western New Yorkers!
It appears that Treasury Secretary Paulson and the Bush administration determined that the GSEs Â were unable to perform their housing missions at a time when they were most needed. Â The GSEs were trying unsuccessfully to raise capital. Â By the government’s take over, the GSEs will not be under any further pressure to sell assets.
Recently rates were rising due to the risk of the GSEs potential failure. Â Now that this has been addressed, mortgage liquidity should improve and rates decline in the short term. Â The extent of the decline is not yet clear. Â We will have to wait and see what happens to Treasury yields in the next few days and weeks.
One of the industry consultants that we work with, Brian Chappelle, Â stated, “without capital constraints in the near term and based on (Treasury) Â Secretary Paulson’s comments, we believe the new Fannie and Freddie will likely rollback at least some of their price increases and loosen underwriting requirements to some extent”
Read Also:Â What do you think of the Housing Resuce Bill?
Industry analysts predict a lot of debate over the next year and possibly beyond about the future size and structure of the GSEs. Â That debate is unlikely to take place until after Â the November elections. Â They also predict that the steps taken yesterday should speed up the overall recovery of the housing industry. Â This should be great news to our Florida and Arizona markets.
It seems clear that Secretary Paulson concluded that the GSEs could not serve two masters. Â They were publicly traded, and therefore, had a responsibility to shareholders but they also had a mission to serve home ownership. Â Secretary Paulson identified two immediate goals: Â (1) increase the availability of mortgage finance and (2) lower mortgage interest rates through the government guarantee of the GSE debt. Â Secretary Paulson also stated “our economy and our markets will not recover until the bulk of this housing correction is behind us.” Â
One factor we don’t know is how the Mortgage Insurance industry will react to these changes. Â It does appear that the growth of FHA which was on it’s way to 50% (national) market share this year will be slowed. Â
David Wessel, economic editor of the Wall Street Journal Â stated “the losers are the shareholders, the CEOs (that got fired) and taxpayers who have taken on a huge obligation. Â The big winners are people who hold debt in the GSEs, and if the plan works, the overall economy and homeowners too.”Â Â