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Fannie and Freddie Go Federal

Posted by: Michael Dudley

8 September 2008 - 1:00pm

The government takeover of Fannie Mae and Freddie Mac will likely bring lower interest rates, but tighter eligibility requirements and stricter monitoring of underwriting.

"Sunday's federal takeover of Fannie Mae and Freddie Mac will likely translate into lower mortgage rates and greater availability of credit, experts said. Rates could drop by 1 percentage point from the stubbornly-high 6.39% for a 30-year fixed rate mortgage.

The government bailout is aimed at making mortgages easier to obtain and afford. By shoring up the mortgage financing giants, they can continue buying mortgages from lenders and injecting much-needed cash into the system.

But the news isn't all good. With Friday's report that foreclosures and delinquencies are at all-time highs, Fannie and Freddie are expected to maintain - if not ratchet up - tighter lending standards. With defaults and delinquencies multiplying and home prices falling, Fannie and Freddie will likely keep a close eye on underwriting practices."

Full Story: What rescue means for mortgage rates
Source: CNN, September 8, 2008
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