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Financial Takeover by the Federal Government Creates a Safety Net

The federal acquisition of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, also known as Fannie Mae and Freddie Mac, represents a significant shift in the local financial landscape. Checkout Federated Financial for more info. The financial crisis that followed the takeover has been compared to the Great Depression. That’s bad news for any real estate agent, let alone a buyer or seller. It isn’t all evil, though. In reality, now is an excellent time to purchase.

What does it mean for the Federal Housing Finance Agency (FHFA) to be in charge of the two major lending institutions, and why was it deemed necessary? Well, Fannie Mae and Freddie Mac were losing $14.9 billion a year, had a $1.6 trillion deficit, and over $3 trillion in non-solvent mortgage-backed securities, and the federal government had pledged $200 billion in preferred stock and credit to hold them afloat. The FHFA saw a need for action when one of the big financial investment firms, Lehman Brothers, filed for bankruptcy and the other, Merril Lynch, was bought out for half of what they’d recently been valued at. Mortgage prices are falling as the risk of investing in mortgage-backed securities is decreased, which has a significant effect on the average real estate buyer and seller.

So, with interest rates as low as they are, now is a fantastic time to invest in real estate. That was basically the takeover’s target. If it may seem frightening that two big lenders have lost control of their activities, the effect is similar to a parent signing consent for something: the risk factor is reduced. As a result, more confident buyers should emerge, which should help to address the financial issues that led to the breakdown that necessitated the acquisition.

Words like “depression” and “bankruptcy” evoke fear in our minds. But don’t be discouraged by this hiccup. Instead, go out and be the change you want to see: purchase now when prices are low and show the nation that you aren’t afraid, and your acts will become a self-fulfilling prophecy.