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Wednesday, November 26th, 2008

Feds Buy $600 Billion in Mortgage-Related Assets

In another attempt to quell the growing financial crisis, the Federal Reserve announced Tuesday it will buy up to $600 billion in mortgage-backed assets.

The Fed will purchase $100 billion of Freddie Mac, Fannie Mae and the Federal Home Loan Bank's direct obligations, as well as $500 billion in mortgage-backed securities.

This deal came at the same time as their new program to unfreeze credit lines was announced.

The hope is that this move will help bring down mortgage rates across the country.

Although details are still being worked out, the plan could provide guarantees for up to 3 million at-risk mortgages, according to a confidential Reuters source.

The Treasury Department confirmed that it's working with policymakers on foreclosure-prevention measures but didn't to get into specifics.

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Posted in Bankruptcy and the Economy | No Comments »

Monday, September 8th, 2008

The Fannie & Freddie Government Bailout

The U.S. government announced yesterday that it will implement tighter control on troubled mortgage titans Freddie Mac and Fannie Mae in an effort to save the companies from financial ruin.

Confidence in the companies has faded as property values plummet and mortgage foreclosures skyrocket.

The Federal Housing Finance Agency (FHFA), which regulated the two companies’ transactions, will now run the companies.

The temporary public ownership plan would be the biggest fiscal bailout in U.S. history.

Together, the companies have lent $5.3 trillion of the total $12 trillion of outstanding mortgage debt in the United States and have lost more than $3 billion alone between April and June.

U.S. Treasure Secretary Henry M. Paulson Jr. said in a press release that the FHFA will operate the companies in a “conservatorship.”

Under this plan, the government will guarantee the companies’ debt, bring in new management and provide fresh liquidity to make them less susceptible to the declining housing market.

The Congressional Budget Office said the move could potentially cost taxpayers $25 billion and it would take at least a year to remedy.

Presidential candidates Sen. Barack Obama and Sen. John McCain were briefed about the move this weekend.

McCain immediately backed the action while Obama said he would reserve judgment until he got more details on the issue saying, "We have to protect taxpayers and not bail out the shareholders and management.”

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Posted in Mortgage Foreclosure | 1 Comment »

Wednesday, July 30th, 2008

Bush Okays Housing Foreclosure Rescue Plan

Despite earlier promises to veto any housing bill that rescued "irresponsible homeowners," President Bush signed into law a massive housing bill that is the largest government intervention in the housing industry in at least a generation, and likely since the New Deal of the 1930s.

The bill has a two-pronged approach: it provides guarantees and backing for Fannie Mae and Freddie Mac, two of the nation's largest mortgage security companies (which account for nearly half of the 12 trillion dollar housing industry), and it also provides relief for homeowners facing loss of homes to foreclosure by allowing them to replace their troubled loans with more stable government-backed loans.

The bill also contained a measure to increase the Treasury's borrowing capacity.

The bill increases the national deficit by a projected $800 billion, to over $10 trillion.

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Posted in Bankruptcy and the Economy, Mortgage Foreclosure | 1 Comment »