Prior To Fannie Mae And Freddie Mac Bailout How Did They Compete For Funding

Prior To Fannie Mae And Freddie Bailout How Did They Compete For Funding Mac During A#

Prior To Fannie Mae And Freddie Bailout How Did They Compete For Funding Mac During A

So how does this change affect you? Here is a list of the winners and losers in this situation. This is a decision that has a huge impact on global financial markets. Yesterday Henry Paulson decided to use the power given to him by the housing bailout bill to officially take over Fannie Mae and Freddie Mac. Barack Obama who has decided to continue campaigning in the face of a possible failure on the bailout of the banking crisis may be called irresponsible considering the Democratic Congress has accepted money from Both Fannie Mae and Freddie Mac during a time when Republicans Like John McCain were introducing legislation that could have averted this crisis, others like Chris Dodd and Barney.

Homebuyers with cash - The news of the takeover sent mortgage rates on 30 year fixed conforming loans by almost a quarter of a percent according to Bankrate and it is expected to fall a bit more in the next few weeks. A conservatorship isn't a takeover of the ownership, but a. Treasury in September 2008. Housing market, and the implications of their recent government takeover.The federal takeover of Fannie Mae and Freddie Mac was the placing into conservatorship of the government-sponsored enterprises (GSEs) Federal National Mortgage Association ( Fannie Mae) and Federal Home Loan Mortgage Corporation ( Freddie Mac) by the U.S.

If both of these companies defaulted on all of these securites the Chinese national bank may have gone bankrupt.Non-Americans - As I said in the previous point, many foreign banks purchased the debt backed securities issued by Fannie and Freddie. For example, China's People's Bank owns more than $300 billion in Fannie and Freddie's mortgage backed securities. The biggest winners are the financial and homebuilding industry.Banks that invested in Fannie and Freddie's debt - Fannie and Freddie sold trillions of dollars in mortgaged backed securities to central banks all around the world. Home mortgage.Investors in financials and homebuilders - The stock market rallied on the news that the government is taking over Fannie and Freddie. Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) i.e., private companies sponsored by the government in the U.S. Lending criteria is more stringent than previous years so loans may only be available to the most qualified borrowers with a substantial downpayment and great credit.Fannie Mae vs Freddie Mac comparison.

Considering that Fannie and Freddie holds approximately $5 trillion in home loans and currently more than 9% of loans are in the process of defaulting, then simple math tells us that these two companies could potentially lose $450 billion. Noone knows the final damage this bailout will do to the Treasury, but most believe that the losses will be in the hundreds of billions. LosersAmerican taxpayers - This bailout is not free. Additionally, the money used for the bailout is straight from the pockets of American taxpayers.

As a result those who hold these stocks directly or through a mutual fund are seeing losses in their investments.Home sellers facing plunging home prices - Even though this bailout will reduce mortgage rates for the best borrowers, it probably will not do anything to stem the plunging home prices in the most bubblicious areas of the country. Technically these two companies are now under a conservatorship which basically means that they are bankrupt. Now that the dividends are eliminated these banks no longer have a steady income stream and may fail.Existing shareholders of Fannie and Freddie's stocks - This is pretty obvious since the stock price of Fannie and Freddie fell to under $1. According to this article, many small banks around the country used the preferred shares of Fannie and Freddie as income investments.

Finally, I hope that a positive effect that comes out of this giant mess is that Americans will learn to save again and realize that an economy held up by debt cannot be sustained.Here's a copy of an email I had sent to my friends on the same subject, from a little different perspective.I read Xin Lu's article with a sense of deja vuThe Freddie /Fannie problems is not well understood, by the public, by congress, or by the experts.The total amount of Mortgages outstanding in the US is about 12 trillion dollars, of which Freddie and Fannie have guaranteed about 5 Trillion.Mortgages are debts, that come due over a period of time, thus, when you buy a home, for let's say $200,000, over the thirty year period, the total amount that will be paid, including interest at 7.5%, would be $504000.The $504,000. As consumers, all we can do is be vigilant as to where our money is kept and be careful when we enter into important financial contracts. Whether this decision makes America stronger or weaker in the global economy is up for debate. Indeed, America is using public funds to take over more than 50% of the credit market. The global reach of Fannie and Freddie is humongous and this takeover move has some commentators saying that America is now 'more communist than China' and ' more socialist than France '.

Sovereign Wealth Funds owned by Foreign Nations. The Debt is separate.The 'others' that Fannie sells the debt to, include, but are not limited to. They own shares in the company.

Some of the Conservative economists who really understand the situation have estimated the actual loss to be about $1.3 Trillion. Because the mortgages were sliced, diced, insured, re insured and revalued by questionable mathematical formulas, the actual value is almost impossible to fairly evaluate.Almost for certain, the amount at risk is many times the $500Billion that the government has estimated. That allowed Fannie (and Freddie) to operate with more freely, and to make risky decisions that now have resulted in the reported book assets being valued at much more than they are actually worth.That in a nutshell, (without explaining CDO's, Credit Derivative Swaps and a few dozen more exotic financial instruments) is about what happened.

The final result could be debt of $1 to $2 Trillion dollars to be paid for by the US Government. With the Government now having agreed to 'back' the assets, so that the Sovereign Wealth Funds, Pension Funds, and Brokerage Houses won't have take a loss on their investment. Now for the final nail in the coffin. And that is just for Fannie Mae and Freddie Mac. The actual losses could possibly reach as much as $3 Trillion Dollars.

:-) :-) :-)Thank your congressmen for the way they've protected your interests.Very nice and intelligent comments. And that doesn't even take into consideration hyperinflation, depression, or global warming. Wouldn't dare estimate these losses. It looks as though about 100 banks may close by the end of this year, and I've heard that as many as 1,000 are on the near time 'watch list'. In order for Uncle Sam to pay off in full on those investments in Freddie and Fannie (which normally would be at risk to the investors.), every US citizen (man woman and child) is going to have to kick in $2,000 to $4,000.For the next big dollars that you're going to have to pay out of your future, watch the FDIC, which will pay off when the banks go belly up, and the Pension Benefit Guaranty Fund,both of which are already 'Broke'.No one has yet estimated either of these losses, though a year ago, the Pension Funds were in the red by about $600 Billion Dollars.

They can't.I don't know why the U.S. I'll save you the headache. Buy now and pay later is the culprit.What happened to the depression era value I was taught by my Grandfather and Dad about save now then buy?I agree the prices for homes and especially education in our country are ridiculous.Financial education is so poor in this country it's sickening.When people think 'How much is this going to cost me monthly'? have already failed Financial 101.I dare you to ask the 'normal' citizen to explain future/present value.

Prior To Fannie Mae And Freddie Mac Bailout How Did They Compete For Funding