As Fannie Mae and Freddie Mac continue to suffer huge losses because of declining home prices and increased foreclosures, the government may jump in with the hope of preventing default on their debt.
The government is considering placing the two in a conservatorship, which means shares of Freddie and Fannie would be worthless and losses on any guaranteed mortgages they own would be paid by taxpayers. Freddie Mac and Fannie Mae are the biggest providers of financing for domestic home loans. In recent weeks both have suffered big losses in stock prices while they also battle increased borrowing costs in debt markets. The fear is that these issues will make it difficult for Fannie and Freddie to buy loans from commercial lenders, which will likely increase the difficulty and costs of consumers getting loans.
The government is considering placing the two in a conservatorship, which means shares of Freddie and Fannie would be worthless and losses on any guaranteed mortgages they own would be paid by taxpayers. Freddie Mac and Fannie Mae are the biggest providers of financing for domestic home loans. In recent weeks both have suffered big losses in stock prices while they also battle increased borrowing costs in debt markets. The fear is that these issues will make it difficult for Fannie and Freddie to buy loans from commercial lenders, which will likely increase the difficulty and costs of consumers getting loans.
1 comment:
The government may jump in with the hope of preventing default on their debt.
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Julie
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