Impact On You Of Mortgage Giants' Takeover

Vera Gibbons On Likely Effect On Joe Main Street Of Federal Fannie Mae/Freddie Mac Move

(CBS)  With Washington taking over mortgage goliaths Fannie Mae and Freddie Mac, many current and would-be homeowners are wondering what effect the move is likely to have on them.

On The Early Show Monday, Treasury Secretary Henry Paulson told co-anchor Harry Smith the government had no choice but to act, saying, "A failure by either one of these companies would cause great havoc in the economic system. It would be a big blow to the average American. (It would) affect their budget, their ability to get a consumer loan, a car loan."

And Early Show personal finance contributor Vera Gibbons addressed questions from people on the street.

From Ashley Walker, of Lumberton, N.C.:

How is this going to affect the housing market? Is it going to make it harder for first-time home buyers to get a loan? ... Every month, you hear about foreclosure rates going up; what does this mean to us?

For starters, Gibbons explained, more liquidity in the financial system -- a $200 billion cash infusion -- will mean more financing options for first-time home buyers. More credit will be available. Mortgage rates should stabilize, and may even come down as much as a full point. But the takeover won't do much to prevent home prices form continuing to decline. It's not going to solve the foreclosure mess. Some 1.2 million homes are in foreclosure nationwide. And it's expected that the foreclosure rate will continue to rise. We need to wipe out some of that excess housing inventory (too many on up for sale) for the price situation to stabilize.

"It's all about providing stability and credibility back to the market," Gibbons observed.

From Joe Marr, of Oceanside, on Long Island, N.Y.:

"Why is the government helping out?"

The reason the government is helping Fannie and Freddie out is to stabilize the market for mortgage-backed securities, to put them in position to create greater financing opportunities for home buyers and homeowners, and to ultimately avert a collapse here. Adds Gibbons, "It's about bringing stability back, instilling a sense of confidence, alleviating the fears, the uncertainty that's out there. This is a big, expensive intervention, but it's necessary. Over 50 percent of the loans pass thru the hands of Fannie and Freddie. They're the glue that holds the housing market together." Keep in mind: Together they own or guarantee about $5 trillion in home loans. If the government didn't act, there could have been a "complete disaster for financial markets here and abroad," with its obvious implications for the broader economy and economic growth.

From Jerry Mathews, of Waldwick, N.J.:

What happens to the investors have put into (Fannie and Freddie)? Do they lose it all, or get some of it back from the government?

There's been a 90 percent decline in Fannie and Freddie shares over the last year, with more expected today. The biggest losers will be mutual funds. But the lesson here to small investors is that diversification is key.

From Marcia Weinstein, of Freehold Township, N.J.:

Is this a good time to get a second mortgage? Or is it going to be harder at this time?

Fannie and Freddie don't back second mortgages -- banks, credit unions and mortgage companies do -- and those are typically privately funded. But there cud be ripple effect as things sort of stabilize, but we won't see any sort of dramatic impact on second mortgages. Market stability may mean greater opportunities to get such loans at banks, credit unions and mortgage companies. Some who've stopped offering them may get back into it, but it's not as if there' suddenly going to be some huge opportunity for second mortgages!

[random_radar]

If you can''t pay your bills, you declare bankruptcy and liquidate your assets to pay creditors.

When rich people make bad investments, they ask their friends in the government to bail them out so they don''t have to declare bankruptcy and liquidate their assets.

When the government gets into financial trouble, they can''t declare bankruptcy. They just start printing money and pay their bills.

We are in the phase of collapse where the rich are begging for bail outs and the government is manufacturing money to prop up the system. The next step is where foreign investors foreclose on America, liquidate the country, and take control of everything with us as chattels in abject servitude.

We sold ourselves into slavery.

[juwboy]

USA -- socialism for the rich, capitalism for the poor.

[jlopezmil]

Of Course, they have a heart and want to help the working class in the USA. Hijos mios ahi los dejo, que el mas vivo viva del mas pendejo is the philosophy of the US and worldwide interests. US Citizens are peons for the rest of the rich world. European enjoy 8 weeks vacations.

China has taken over no question. How do we regain our copetitive and comparative advantage internationally? Ask an economist. Plain and simple.

.

[mikexxxxx]

Corporate Socialism,... Need I say more?

[tibu987]

Not to worry.

The Bush regime will simply borrow more money from China to create a false economy in the U.S.

Sheeeeesh!

[lochlan-2009]

*** or get off the pot America. Enjoy the *** ream, since you don''t have the balls to do anything against these people.

[whitemale08]

You are already paying for the bailout through hyper-inflation, at the pump and at the grocery store and it''s only going to get so bad that trust me, more and more people are going to starve to death right here in America.

When Republicans have for decades brainwashed the American public with the philosophy that "defecits don''t matter" and "tax cuts for the rich" bring about "economic success", it''s just that that has ruined our economy in a real literal sense.

They have managed to destroy the "great recovery" and hard work of Franklin D. Roosevelt from the "great depression".

Thanks Republicans...for everything you do, you hate the "middle-class" and would rather everybody be starving "serfs" and yet claim to be Christian.

[noloyalisti]

The impact on me personally and all of us taxpayers is that there still is no government oversight and this money is coming out of my pocket again. I guess that''s how it goes in fascist countries like America. Occupied by a bunch of ignorant sheeple. Time to rise up sheep!

[forthepeaple]

COME ON YOU GUYS, WHY DO YOU ALL STILL BELEIVE ANYTHING THAT THE GREAT MR.POTATO-HEAD SAYS.(PAULSON) WHAT A BUNCH OF ***!!

AND WHY DO YOU ALL SAY THIS. WELL WE CANT LET THEM FALL. BULL ***..THEY ARE LETTING MILLIONS OF GOOD AMERICANS FALL EACH WEEK..THEY ARE NO DIFFERANT THAT US.. THEY MADE BAD DECISIONS ON THE MORAGE MESS. AND IF YOU LOOK AT WHAT AND WHO IS GOING BAD NOW IS ALL THE ONES THIS LIEING GOVERNEMNT SAID WOULD NOT BE INCUDED IN THIS MESS THEY SAID ITS ONLY THE SUB PRIME PEOPLE. WHAT A BUNCH OF GRAP THAT WAS COMMING OUT OF THEIR MOUTHS.

DONT YOU ALL KNOW THAT MR.POTATO-HEAD JUST GOT BACK FROM CHINA( A COMMIST CONTRY) AND I WOULD PUT MY LIFE ON THAT THEY TOLD MR POTATO-HEAD PAULSON THAT HE BETTER DO SOMETHING ABOUT THE FANNIE/FREDDIE GRAP BECAUSE CHINA HOLDS MORE THAN 70% OF THE PAPER!!!!!!!!!!!!!!!!

GO AHEAD AND ASK PAULSON WHO REALLY OWNS THE PAPER OF THEM..ITS NOT AMERICANS!!!

BUT AMERICANS ARE BAILLING OUT CHINASO ASK THEM ALL THIS , WHY SHOULD AMERICANS BAIL OUT CHINA!!!! ISN;T THAT WHAT WE ARE REALLY DOING!!! YES AMERICANS ARE BAILLING OUT CHINA

WE HAVE TO TAKE ALL MEMBERS OUT OF CONGRESS/SENATORS THAT HAVE MORE THAN 6 YEARS IN OFFICE..PUT AMERICANS THAT WANT TO HELP AMERICA..PUT AMERICANS FIRST RATHER THAN THE RICH AND WALL STREET..


SO REAL CHANGE WILL ONLY COME WHEN AMERICANS WAKE UP TO THE FACT THAT THIS IS THE ONLY WAY TO CHANGE ARE GOVERMENT.

DAVID A BELANGER,VETERAN, U.S. ARMY.
[e-mail], 978-618-3105

[forthepeaple]

COME ON YOU GUYS, WHY DO YOU ALL STILL BELEIVE ANYTHING THAT THE GREAT MR.POTATO-HEAD SAYS.(PAULSON) WHAT A BUNCH OF ***!!

AND WHY DO YOU ALL SAY THIS. WELL WE CANT LET THEM FALL. BULL ***..THEY ARE LETTING MILLIONS OF GOOD AMERICANS FALL EACH WEEK..THEY ARE NO DIFFERANT THAT US.. THEY MADE BAD DECISIONS ON THE MORAGE MESS. AND IF YOU LOOK AT WHAT AND WHO IS GOING BAD NOW IS ALL THE ONES THIS LIEING GOVERNEMNT SAID WOULD NOT BE INCUDED IN THIS MESS THEY SAID ITS ONLY THE SUB PRIME PEOPLE. WHAT A BUNCH OF GRAP THAT WAS COMMING OUT OF THEIR MOUTHS.

DONT YOU ALL KNOW THAT MR.POTATO-HEAD JUST GOT BACK FROM CHINA( A COMMIST CONTRY) AND I WOULD PUT MY LIFE ON THAT THEY TOLD MR POTATO-HEAD PAULSON THAT HE BETTER DO SOMETHING ABOUT THE FANNIE/FREDDIE GRAP BECAUSE CHINA HOLDS MORE THAN 70% OF THE PAPER!!!!!!!!!!!!!!!!

GO AHEAD AND ASK PAULSON WHO REALLY OWNS THE PAPER OF THEM..ITS NOT AMERICANS!!!

BUT AMERICANS ARE BAILLING OUT CHINASO ASK THEM ALL THIS , WHY SHOULD AMERICANS BAIL OUT CHINA!!!! ISN;T THAT WHAT WE ARE REALLY DOING!!! YES AMERICANS ARE BAILLING OUT CHINA

WE HAVE TO TAKE ALL MEMBERS OUT OF CONGRESS/SENATORS THAT HAVE MORE THAN 6 YEARS IN OFFICE..PUT AMERICANS THAT WANT TO HELP AMERICA..PUT AMERICANS FIRST RATHER THAN THE RICH AND WALL STREET..


SO REAL CHANGE WILL ONLY COME WHEN AMERICANS WAKE UP TO THE FACT THAT THIS IS THE ONLY WAY TO CHANGE ARE GOVERMENT.

DAVID A BELANGER,VETERAN, U.S. ARMY.
[e-mail], 978-618-3105