Fannie Mae & Freddie Mac Bailed Out!
Mortgage giants Fannie Mae and Freddie Mac have been now taken over by the U.S. Government in hopes to stabilize the financial markets; not only in the U.S. but globally as well. It seems that the immediate response in the financial markets has been positive as the stock market rallied in response to the news. Not only that, mortgage interest rates dropped significantly at the beginning of the week to levels we haven't seen for quite a while.
Although rates have dropped, don't expect the lending institutions to ease the mortgage qualifications for obtaining a loan. Strict guidelines are still in place and will be for some time to come. Obviously, the tight and very strict lending guidelines are due the billions of dollars of write offs incurred by lending institutions as a result of past "bad" mortgage loans and the deterioration of the housing market, among other things. However, this isn't stopping people from jumping into the housing market to take advantage of low interest rates and great San Diego home values.
So, the big question is, "will the Fannie Mae and Freddie Mac conservatorship work and be beneficial?" A great benchmark to determine this is to keep an eye on mortgage rates; as long as there is a significant supply of mortgage financing available and at practical pricing there should be some success amongst this mortgage crisis. Time will tell!