It’s Official: Fannie & Freddie are Not Dead Yet


I just received the official statement from the Federal Housing Finance Agency (FHFA)regarding the status of Fannie Mae and Freddie Mac.   It has been announced that they are now in "conservatorship".   FHFA has defined conservatorship on their handy Conservatorship Q&A page as:

"A conservatorship is a legal process in which a person or entity is appointed to establish control and oversight of a Company to put it in a sound a solvent condition.  In a conservatorship, the powers of the Company’s directors, officers, and shareholders are transferred to the designated Conservator….

In this instance, the Federal Housing Finance Agency has been appointed by its Director to be the Conservator of the Company [Fannie Mae & Freddie Mac]…to keep the Company in a safe and solvent financial condition."

From this morning’s press release:

"The goal of these actions is to help restore confidence in Fannie Mae and Freddie Mac, enhance their capacity to fulfill their mission, and mitigate the systematic risk that has contributed directly to the instability in the current market.  The lack of confidence has resulted in the continuing widening of their MBS [mortgage backed securities], which means that virtually none of the large drop in interest rates over the past year has been passed on to the mortgage markets.  On top of that, Freddie Mac and Fannie Mae, in order to try to build capital, have continued to raise prices and tighten credit standards."

This could eventually translate to lower mortgage interest rates for you and me.  Monday and the days following will be fascinating as we continue during these historic times in the mortgage industry.

I think it’s a little too early in the game for Fannie and Freddie’s Eulogy.   The Government is all over making sure this patient is stable and recovering.   Fannie and Freddie are "not dead yet"!

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