OpinionIndustry News

Fed move on Fannie, Freddie is ‘good news’

Perspective: Takeover makes financing more certain

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Treasury Secretary Henry Paulson and Federal Housing Finance Agency Director James Lockhart held a press conference Sunday to announce that the government had placed Fannie Mae and Freddie Mac under conservatorship. After meetings with the boards of directors for both organizations, the Federal Housing Finance Agency took control of these institutions that are vital to home loans. Fannie Mae and Freddie Mac are government-sponsored enterprises that are involved in more than half of all the real estate financing in the United States. They do that by buying loans from banks and packaging those loans as mortgage-backed securities, then selling those securities. By purchasing the loans from banks, the banks get the capital to make new loans. The sale of mortgage-backed securities by Fannie and Freddie has been hurt by concerns over subprime loans and the higher-than-normal default rates on mortgages. Fannie and Freddie are involved in $5.4 trillion worth of mortgage debt. T...