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.

What does this mean for the Real Estate Community? – This stability of money into our mortgage market should make mortgage Back securities, (Bonds in general) more attractive for investment capital. This should over time increase bond sales and lower interest rates which should increase Real Estate business in the Lehigh Valley. And don’t forget about the first-time –Home buyer Tax credit  as well – make sure you are getting the word out to the community.

All in all this is a necessary move by the federal Government – and along with FHA financing, we have the basic tool we need to make the American dream possible for residence of the Lehigh Valley, and hopefully some quick relief for the real Estate Community.

If you would like to learn more about us please go to our web-site www.lehighvalleywealth.com and visit our wisdom center. There are over 220+ hours of educational content for listening, reading, and mp3 downloads available free to you. In the weeks ahead, we will be launching the Real Estate Success Series. With interviews from Top Producing Real Estate Agents from across the country as well as Audio teachings and sessions with our nations top real Estate coaches. Our web-site again is www.lehighvalleywealth.com our phone number is 610-432-6600 that is 610-432-6600

Remember this alert brought to you by the Lehigh Valley Wealth Center – Strategic Mortgage Planning. I am Ken Unangst, the leader of the Lehigh Valley Wealth Center and a certified Mortgage Planner with over 21 years of mortgage writing experience in the Lehigh Valley.