Federal Financial Takeover Creates Safety Net

                                                                                         

The federal takeover of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, affectionately referred to as Fannie Mae and Freddie Mac, marks a major change on the local financial front. The financial crisis that preceded the takeover is being touted as the worst since the Great Depression. That's news no real estate agent, let alone buyer or seller, wants to hear. But it isn't all bad. In fact, now is a great time to buy.

What does it mean to have the Federal Housing Finance Agency (FHFA) in control of the two major loaning enterprises, and why was this takeover seen as necessary? Well, Fannie Mae and Freddie Mac were experiencing losses of $14.9 billion, and a debt of $1.6 trillion, plus over $3 trillion in non-solvent mortgage backed securities, and the national Treasury had committed $200 billion in preferred stock and credit to keep them up and running. When one of the major financial investment agencies, Lehman Brothers, filed for bankruptcy, and the other, Merril Lynch was bought-out for half of what they'd recently been assessed at, the FHFA saw a need for action, and instigated federal control over Mae and Mac. One of the major impacts on the average real estate buyer and seller is that mortgage rates are dropping because the risk of investment in mortgage backed securities has been reduced.

So with low rates this low, it really is a great time to buy real estate. That was essentially the goal of the takeover. While it seems scary that two major lenders are in the flop house, having lost control of their own operations, the affect is somewhat like a parent signing their consent for something: the risk factor is reduced. The result should be more confident buying, which, ideally, will work to correct the financial problems that caused the breakdown that necessitated the takeover.

When we hear words like "depression" and "bankruptcy" they tend to strike fear into our hearts. But don't let this bump give you despair. Instead, get out there and be the change you want to see: buy while rates are low and show the country you aren't scared, and your actions will be a self fulfilling prophecy.

About the author:
Anne Eliason is a dedicated professional specializing in Phoenix real estate. For information on Mesa real estate or for help with all your Phoenix Valley relocation needs, visit Anne online at Phoenix-Valley-Real-Estate.com.

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