This is Phil Osborne with the Lehigh Valley Wealth Center brining you a wealth Center Alert

Today an unprecedented Government takeover of Two Mortgage Giants Fannie Mae (FNMA) & Freddie Mac (FHLMC) was announced. The Government poured a 100 Billion Dollars of your tax Dollars to not only bail out but physically take control of these two companies. Both CEO’s were let go. we are told with this large influx of money, and the promise to continue to invest tax dollars into both companies , it will be business as usual. The government is also guaranteeing to purchase or make up the difference in selling the mortgage on the secondary market.

First: Why did this occur? Because of the recent lack of appetite for Fannie Mae and Freddie Mac mortgage bonds due to the continued difficulty finding investment dollars to fund mortgage (The Mortgage Back Securities Market) caused the two mortgage giants to have to do something to make their Bonds more attractive…( in other words find someone to buy them) so they offered their Bonds at higher yields (interest rate and price) to gain more investor interest. However, since they couldn’t go back and raise the interest rates on loans that had already been closed, Fannie and Freddie would have to make up the difference sucking even more profits out of Fannie and Freddie, reducing capital even further, and exacerbating the problem and the Credit Crisis we have and are continuing to suffer through. To date Fanny Mae and Freddie Mac have combine losses of 14 billion

This take over is similar to a chapter 11 Bankruptcy for restructuring. This take over by the federal government will be temporary I am told. However for now the Government and the treasury are now running the show.

Even worse news, stockholders in these companies may loose it all as the company is no longer a publicly traded company. It will be interesting to see what happens there.

This is the larges exposure ever by the federal government to loose billions of tax payer dollars to keep our national mortgage market alive, and keep our economy from collapse in my opinion.

So What does this mean? Home loan rates should come down due to the governments purchase of fannie mae and Freddie mac mortgage backed securities in the bond market. A boost in bond prices could drop mortgage rates significantly in the coming months. This also could mean continued credit tightening from mortgage lenders as the government’s exposure to any type of risky loan will not be tolerated. Now is the time to take action. If you are a first time homebuyer and are on the fence, it is time to jump and move into the market. Tax credit is available for first time buyers until june of 2009. If you have considered doing any type of home improvement, debt consolidation or if you are real estate investor and need leverage now is the time to ACT!!!
If you don’t have 6 months operating expenses in cash availability in the bank now is the time to call us, the unemployment rate has ticked up to 6.1% as the unemployed has reached 600k total in 2008 and 84k just in august. Now is the time to protect yourself and reposition equity into cash reserves if you have equity.

Finally if you are a client of the wealth center and have obtained mortgage financing from us in the past now is the time to check in with us and we will see if it is now time to refinance into a fixed rate loan and restructure your current loan. For those of you who have not hear of us please visit the wisdom center and you will find a couple hundred hours of downloadable content for your listening pleasure. We are certified mortgage planners with over 20+ years mortgage lending experience.

Thank you