Freddie Mac and Fannie Mae: Crumbling Cornerstones
September 6th, 2008 Categories: Graphs and Charts, Mortgage and Loans, Real Estate News, Real Estate Trends
The federal government is poised to take over the two largest Mortgage Giants. Between the two of them they own or guarantee almost half the home loans in the country’s roughly $12 trillion mortgage market. Over the past year, the companies have recorded combined losses of around $14 billion.
Fannie and Freddie were created in the 30’s and 70’s; respectively, to create a secondary mortgage market. Banks and thrifts hold more than $1 trillion in Fannie and Freddie bonds because they are considered as good as cash.
Without the bailout, the Credit Crunch would only get worse, as the mortgage market would have huge liquidity problems; Without buyers like Fannie and Freddie, big mortgage lenders have nowhere to go to sell packaged loans in order to continue to write new loans.
