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Fannie Mae and Freddie Mac

Posted by admin | September 8, 2008

While I was enjoying watching Brett Favre and my beloved New York Jets win their season opener, it’s good to know that the government was hard at work helping our housing market. As you’ve heard by now, yesterday Treasury Secretary Henry Paulson (pictured) announced a takeover of mortgage giants Fannie Mae and Freddie Mac.

Together, Fannie and Freddie own or guarantee more than $5 trillion in mortgages. Their survival is crucial to the health of the U.S. housing market and, indeed, the entire economy. The takeover is designed to help lower mortgage rates and make it easier for people to get or refinance mortgages. John McCain and Barack Obama today each announced their support for the government’s action, and the market responded by sending the Dow Jones up 290 points.

The real test, of course, is seeing whether this will translate into more home sales and an increase in mortgage approvals. The nation’s housing inventory level currently stands at 11.2 months, far above the 6 month inventory level that represents a health housing market.

It will take a combination of increased mortgage availability and greater home buyer confidence to lower inventory levels, and in a few months we’ll know whether the government’s action will produce this intended result.