U.S. & World

What Does Fannie Mae/Freddie Mac Takeover Mean?

(WCCO) The federal government made an historic move on Sunday in an effort to try to help the housing market. The Bush Administration officially took control of Fannie Mae and Freddie Mac. Those two mortgage companies together own or back half of the nation's mortgage debt, about $5 trillion.

Treasury Secretary Henry Paulson said he hopes the move will lower mortgage rates, increase home buying and slow down the drop in home values.

"Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner on housing," said Paulson.

Some critics said this move is a gamble that will ultimately backfire.

"Home prices will continue to fall regardless of this government action. Losses will continue to mount regardless of this government action. It's only the taxpayers that are going to cover the losses now," said economist, Joe Battipaglia.

But locally, at least one Realtor is welcoming the news.

"I think it is probably a good thing. We could see the foreclosures were going to continue and something needed to happen. This will bring some cash to the organizations and I think it's going to bring some stability," said Greg Bauman, president of the St. Paul Area Association of Realtors.

Bauman said if the government would not have taken over, and Fannie and Freddie failed, the results would have been devastating. Now with the government in control and funding the organizations, and with new CEOs in place, Bauman said there will be more stability in the housing market.

However, local home buyers and sellers may not see that much of a difference.

"I don't think consumers are really going to see a real impact. I don't think we will see a big change in interest rates and mortgages or the qualifying for them," said Bauman.

Presidential candidates Barack Obama and John McCain both said they support this government takeover.

 

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