The Fannie Mae and Freddie Mac Shake Up

Today I guess I’m focusing on something different. It’s about mortgages and the Fannie Mae and Freddie House Mac shake up. Why? Because I used to be a Fannie Mae and Freddie Mac underwriter and processor before the big layoffs (14 months already). At the same time, I also used to be an FHA and VA processor. Banks keep you very busy.

First came the changes to FHA. No one knows if they will help the industry. From what I hear, FHA is very busy with refinances. I try to keep up with all of the changes going on in case the market turns and jobs become available. Knowing how FHA loans were done in the past when credit score was not a major issue, I can only imagine what they are like now.

So now the Federal Government has taken over Fannie Mae and Freddie Mac. Being an underwriter for Fannie Mae and Freddie Mac, I can say that they were not as easy to get as subprime. When I first started these types of loans, they were pretty clear cut conventional loans. I couldn’t believe when they got involved in the exotic world of mortgages trying to compete with the subprime world. And being in Central Florida, we did a lot of them during the boom for investors and want to be investors. People took equity out of their primary homes and bought second homes with interest only loans or ARMs. Believe me, the operations employees saw the bust coming.

So what does this all mean. I really can’t say. No one can say. This article on CNN seems to think it won’t help the market:

http://money.cnn.com/2008/09/08/news/economy/fannie_freddie_housing/index.htm?postversion=2008090816

Will this really make a difference? This article on The Washington Post says that the calls to banks are picking up because the rates went down:

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/08/AR2008090802450.html?hpid=topnews

I do know that their portfolios are going to be much smaller which means less room for people. I’m sure that their lending guidelines are going to be stricter too. So for anyone who gets turned down and is still in a bind with their mortgage, the best place to turn for help is the Hope Now Alliance:

http://www.hopenow.com/

Time will tell what happens from here. Will it change? Will the housing market rebound? If the price of oil, food and other necessary items does not come down or salaries go up and jobs created, then I don’t believe that this will have a great impact on the housing market. These are the things that created less cash flow contributed to the initial bust to begin with. Coming down a few points in rate does help in the long term but not too much on a monthly basis.

What do you think? Go ahead and share you thoughts about this.