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What the Fannie-Freddie takeover means for mortgage rates

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On Sunday, the government announced that it will take over Fannie Mae and Freddie Mac and assume their respective operations. Mortgage-backed debt is now government debt. But for all the front-page stories today, there's surprisingly little coverage about how the news impacts homeowners in need of a mortgage. Mortgage rates are down sharply today, and possibly forever. See, when Fannie Mae was first created in 1938, it was a federal government entity -- a child of the parent government. Fannie Mae operated that way for 30 years. Then, in 1968, Fannie Mae went on its own. Only saying that Fannie Mae was "on its own" wasn't really true. Despite the spin-off, the federal government continued to give its mortgage child preferential tax and oversight treatment, plus an unspoken promise to guarantee its debts. Think of it like when the child of well-known, wealthy parents starts his own business. There's going to be risks, but there's also going to be that thought in the...