On Sunday, Federal officials unveiled the elaborate plans to takeover Fannie Mae and Freddie Mac, the two giants in mortgage lending backers in the United States. Fannie Mae and Freddie Mac currently back over $5 trillion in home loans, not directly lending the money but backing the money that is lent by mortgage lenders.
The Federal Housing Finance Agency is planning on taking the 2 companies under a federal goverment conservatorship and overseeing their actions until the companies and our national housing market are back on solid ground.
Fannie Mae and Freddie Mac, which are both Fortune 500 companies were originally created by the federal government to back the loans of traditional lenders. Over the last year the two companies have lost nearly $12 billion due to the decline in home prices coupled with the high increase in foreclosures and the inability of buyers to pay their monthly home mortgages.
Federals announced that both companies would be open Monday morning as usual but will have undergone a complete structural facelift over the weekend.
So what about the stock and ownership of the companies? Both the treasury and the FHFA will be purchasing large quantities of preferred stock in the companies to bolster support of the current shareholders and prevent them from mass-selling their stocks.
Stay tuned for more posts on how this will affect current homeowners and potential home buyers as well as what the long-term effects will be with the US government.