This will make foreign governments as well as local bond buyers more willing to purchase debt issued by Fannie and Freddie at a lower rate, since the government is now standing behind that debt.
What This Means for Buyers
Economists and analysts agree that mortgage rates are likely to fall in reaction to this announcement, possibly by as much as one-half to three-quarters of a point or more. Falling mortgage rates typically attract more buyers to the market. This, in turn, helps strengthen property values.
It seems that the ultimate goal is not for the government to permanently take over and control Fannie and Freddie for an indefinite period of time. Instead, it is likely that the goal is to help the market rebound and create a new stable environment so that Fannie and Freddie can one day become privatized again.
This is another step in the right direction toward revitalizing the housing market, but there is still a long way to go. Your Preferred Empire Mortgage Team will continue to keep you apprised of the most recent industry updates, and is available to counsel your clients so they can determine their best course of action in this dynamic market.