Fannie, Freddie Deal May Ease Rates, Cut Foreclosures

Federal takeover may help refresh housing market as dust settles
By Jim O'Neill,  Newser Staff
Posted Sep 8, 2008 7:47 AM CDT
Fannie, Freddie Deal May Ease Rates, Cut Foreclosures
The Fannie Mae building in Washington.   (AP Photo/Manuel Balce Ceneta, File)

How will the government’s seizure of Fannie Mae and Freddie Mac affect homeowners and buyers? In the short term, the New York Times says, interest rates may fall some, but probably not enough to stop the slide in home prices. Some facing foreclosure could have a better chance at refinancing, if the feds decide to offer more incentives—or pressure—to companies holding troubled mortgages.

“The government doesn’t have a great deal of interest in foreclosing on a ton of homes,” one former Fed adviser notes. But a predicted quarter-point drop in rates won't have as big an impact on home prices as the glut of homes on the market, the Times predicts. Freddie and Fannie shareholders, meanwhile, will have to wait to see how much they'll be hurt, but it's not looking good: Henry Paulson said yesterday the companies “will no longer be managed with a strategy to maximize common shareholder returns.”
(Read more Freddie Mac stories.)

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