How The Takeover of Fannie and Freddie Affect Homeownership in Denver, Colorado
The Credit Crunch is not you son’s breakfast cereal.
Fannie Mae is not some distant cousin that was on an episode of The Dukes of Hazzard.
Freddie Mac is not your uncle who stayed on your couch for a week last summer.
You have heard these terms, but with the recent government seizure of the biggest mortgage financiers, it’s probably time for The Devonshire Company to play a little Q and A with all of our people. And yes, if your reading this, you are our people!
Most of you either own a house and a home loan, are thinking about buying a house, or might need to sell a house, so I would pay attention to this one. You will need to know how Aunt Fannie and Uncle Freddie are no doubt impacting your lives.
What Does Fannie and Freddie Do?
These formerly private, yet government sponsored agencies purchase mortgages from commercial banks and lenders. Yes, they even buy loans from our Mortgage Bank, Shire Financial. They then take our loans and package them up into bonds (a process called securitization) and sell them to big investors like insurance companies and pension funds. This process allows companies like Shire Financial, Countrywide, and others continue to free up our balance sheets so that we can keep giving you home loans for all your properties in Lodo, Wash Park, and the Highlands.
Are Fannie and Freddie Going to Fail?
No. But the concern was that as more Americans fell behind on their home payments, Fannie and Freddie might not have had sufficient capital to bear these losses. Thus investors who buy Fannie and Freddie securities ultimately won’t want to buy into a non-performing investment. This locks up the process for everyone….you, me, and the big guys upstairs.
How Does the Takeover Help Me, the Homeowner?Fannie and Freddie own more than half of America’s mortgages. Since more and more Americans were not making good on their payments to their mortgage servicers like Countrywide, Wells Fargo, and Bank of America, investors in Fannie and Freddie were requiring higher returns since there was a lot of added risk. THIS DRIVES UP YOUR INTEREST RATES AND THE COSTS OF YOUR MORTGAGES. So if the United States effectively takes them over, it relieves a ton of risk in the market which drives down rates. If it is cheaper to buy a house, more Americans will buy homes and it will clear excess inventory quicker, which ultimately will drive home prices back up (So long as all other economic factors remain constant).
Will The Housing Slump End Once the Government Completes the Takeover?
Not necessarily overnight, the housing marketplace is typically slow to move, but this will help speed it up. Remember, just because rates are low doesn’t mean that lenders are going to change their guidelines. But if you’re thinking about buying any Denver Real Estate (this also means if you’re selling and buying something new) and you have good credit, you will get financed. Just have a little patience as underwriters are certainly taking their time to ensure they are doing business for people that can afford to pay back loans.
What Should I Do If I’m Not Sure About What To Do With My Existing Home or Next Purchase?It sounds cliché, but just call us 303-433-6688. Talk to anybody in sales. We know it is sometimes scary to call a brokerage because you don’t want to get hounded for the next 6 months if you decide not to buy or sell right away. Look, Devonshire agents are professionals, not part time agents working out of our basements. We’re going shoot you straight. We don’t want to sit on your house that is not going to sell any more than you want to hear annoying sales calls at night.
Fannie Mae is not some distant cousin that was on an episode of The Dukes of Hazzard.
Freddie Mac is not your uncle who stayed on your couch for a week last summer.
You have heard these terms, but with the recent government seizure of the biggest mortgage financiers, it’s probably time for The Devonshire Company to play a little Q and A with all of our people. And yes, if your reading this, you are our people!
Most of you either own a house and a home loan, are thinking about buying a house, or might need to sell a house, so I would pay attention to this one. You will need to know how Aunt Fannie and Uncle Freddie are no doubt impacting your lives.
What Does Fannie and Freddie Do?
These formerly private, yet government sponsored agencies purchase mortgages from commercial banks and lenders. Yes, they even buy loans from our Mortgage Bank, Shire Financial. They then take our loans and package them up into bonds (a process called securitization) and sell them to big investors like insurance companies and pension funds. This process allows companies like Shire Financial, Countrywide, and others continue to free up our balance sheets so that we can keep giving you home loans for all your properties in Lodo, Wash Park, and the Highlands.
Are Fannie and Freddie Going to Fail?
No. But the concern was that as more Americans fell behind on their home payments, Fannie and Freddie might not have had sufficient capital to bear these losses. Thus investors who buy Fannie and Freddie securities ultimately won’t want to buy into a non-performing investment. This locks up the process for everyone….you, me, and the big guys upstairs.
How Does the Takeover Help Me, the Homeowner?Fannie and Freddie own more than half of America’s mortgages. Since more and more Americans were not making good on their payments to their mortgage servicers like Countrywide, Wells Fargo, and Bank of America, investors in Fannie and Freddie were requiring higher returns since there was a lot of added risk. THIS DRIVES UP YOUR INTEREST RATES AND THE COSTS OF YOUR MORTGAGES. So if the United States effectively takes them over, it relieves a ton of risk in the market which drives down rates. If it is cheaper to buy a house, more Americans will buy homes and it will clear excess inventory quicker, which ultimately will drive home prices back up (So long as all other economic factors remain constant).
Will The Housing Slump End Once the Government Completes the Takeover?
Not necessarily overnight, the housing marketplace is typically slow to move, but this will help speed it up. Remember, just because rates are low doesn’t mean that lenders are going to change their guidelines. But if you’re thinking about buying any Denver Real Estate (this also means if you’re selling and buying something new) and you have good credit, you will get financed. Just have a little patience as underwriters are certainly taking their time to ensure they are doing business for people that can afford to pay back loans.
What Should I Do If I’m Not Sure About What To Do With My Existing Home or Next Purchase?It sounds cliché, but just call us 303-433-6688. Talk to anybody in sales. We know it is sometimes scary to call a brokerage because you don’t want to get hounded for the next 6 months if you decide not to buy or sell right away. Look, Devonshire agents are professionals, not part time agents working out of our basements. We’re going shoot you straight. We don’t want to sit on your house that is not going to sell any more than you want to hear annoying sales calls at night.
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