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Fannie Mae and Freddie Mac Bail Out?

With rumors about possible Fannie-Freddie meltdown running wild, it is good to have some perspective. Certainly, if any of those mortgage giants looses liquidity, the impact on the housing market would be huge. Doomsday scenarios predict that getting a home loan or refinancing existing mortgage without Fannie or Freddie buying them back, would become virtually impossible. This is because private lenders would have very limited options to re-invest their mortgages. Fannie May and Freddie Mac used to be the most trusted names on the secondary mortgage market. They are either buying or guaranteeing hundreds of thousands of individual mortgages repackaged as "mortgage-backed securities".

Almost all experts agree that U.S. Government will never allow that. No economy in the World can afford to freeze its mortgage lending industry. The most likely scenario is that we are going to have another "bail out" similar to what happened to Wall Street investment bank - Baer Stearns few months ago. How such bail out would affect activities on the real estate market? Most likely, the impact to borrowers would be minimal with both institutions saved by tax-payers' money and continuing to do the business as before. There could be additional government oversight put in place or some rules of making business changed, but in general, U.S. housing market should not suffer if indeed Fannie Mae and Freddy Mac are to be saved by current Bush administration. This is certainly good news given the fact that in some areas each month brings higher home sales figures. For example, in Arlington Heights IL real estate market, the existing single family home sales rose 45% in June 2008 if compared with the previous month. You can observe the trend at www.homes-arlingtonheights.com and also see other homes for sale in Arlington Heights IL