Fannie and Freddie Get Unconditional Federal Support

On December 24, the government announced it will provide unconditional financial support to Fannie Mae and Freddie Mac. This will expire in 2012, after which the firms will have approximately $290 billion allocated to them.
-September 2008: Bush administration took over Fannie Mae and Freddie Mac at the height of the financial crisis and promised $200 billion to keep them afloat.
- Earlier in 2009: Obama doubled the $200 billion to $400 billion.
- December 24, 2009: The president announces the government will provide unconditional financial support to Fannie Mae and Freddie Mac for 2010-2012.
- December 29, 2009: Analysts predict that Fannie and Freddie will begin purchasing delinquent loans.

These two institutions play an integral role in both the housing and lending industries. When a bank makes a conventional mortgage loan, it will then sell that loan to Fannie Mae or Freddie Mac. This frees up the bank to then make more loans and repeat the process.

When Fannie and Freddie stop buying mortgages from the banks, mortgage credit freezes, banks stop lending, and houses can’t sell. Such was the case last year at the height of the credit crisis. Confidence in these firms is a key component to the flow of credit and this unconditional financial support intends to bolster that confidence.

Despite the short-term unconditional federal support, experts say it is critical for the real estate industry, the lending industry, and the economy that these companies keep their long-term vitality in mind over the next three years.

Source - The Washington Post

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David J Edwards
Real Estate Agent & REALTOR
Edwards Real Estate Group
Keller Williams Realty Southeast Sound
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