Talks between the President and Treasury Sec. Paulson this morning covered the possibility of the nationaliaztion of the GSE's. If that happens mortgage loans will all but STOP. Mortgage rates will rise to 10%+. Lenders will have no place to sell the mortgages. Housing will further sink and your homes value will fall at least another 30%.
The below is a quote from CNN Money.
"Immediately after the markets opened, shares of Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) fell more than 47% from their already battered closing price the day before. They soon rebounded later in the morning but Fannie shares were still down about 28% and Freddie shares were off 24% in early afternoon trading."
What the govt would do is hold them in receivership. We really don't want that to happen. The GSE's have sold MBS (sorry that is industry lingo people might not know) =Mortgage Backed Securites) to the tune of 5.4 Trillion. Say again Trillion. Do we really want the govt. on the hook for associated losses that could occur on a book of assets up to 5.4 Trillion dollars. NOT!
And Fannie and Freddie currently need 75 Billion in captial to cover proposed reserve requirements. They have 1.4 Trillion in offsheet assets.
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