Fannie and Freddie Takeover: So What's the Upshot?
Robert Freedman, Senior Editor
Effective Sunday, U.S. taxpayers are owners of more than 75 percent of Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency, a U.S. regulatory body created as part of the Housing and Economic Recovery Act enacted just about six weeks ago, put the two secondary mortgage market giants into conservatorship on Sunday.
That legal action gives James Lockhart III, the head of the regulatory agency (created out of the old Office of Federal Housing Enterprise Oversight, or OFHEO), the same power as Fannie's and Freddie's directors, officers, and shareholders.
On top of that, the U.S. Treasury Department is buying the companies' senior preferred stock. That's where taxpayers' 75 percent-plus ownership of the companies comes from.
The Treasury is also taking other steps to shore up the companies, including a commitment to purchase their
mortgage-backed securities and create a process through which they can borrow money from the U.S.
Because of the grand scope of the government's takeover of Fannie and Freddie, the ultimate impact of the action can't be known at this early stage. But the short-term impact is expected to be clearly positive for real estate and REALTORS®.
As NAR Chief Economist Lawrence Yun says, mortgage interest rates should go down a bit, making homeownership more affordable.
Lockhart might even reverse Fannie's and Freddie's recent fee hikes, although that's just speculation at this point. In any case, as home sales pick up and the slack in housing inventory tightens, home prices could stabilize, fueling a virtuous cycle that could help get home sales back on solid footing.
Another piece of positive news is that REALTORS®—through NAR—can have some input into what the secondary mortgage market companies will look like in the future. That's because NAR, along with other industry groups, will be providing guidance as to how the companies should be restructured.
You can learn more about the big news with Fannie and Freddie, and what the impact of the government's actions could be, at a new page on REALTOR.org.
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