U.S. Treasury Nationalizes the Mortgage Market

Submitted by Rich Toscano on September 8, 2008 - 7:49pm

We just witnessed yet another weekend bailout for the financial markets. The government takeover of ailing mortgage behemoths Fannie Mae and Freddie Mac was no surprise (prior editorializing can be found here and here) and has been jumped all over by the mainstream press. So I'm not really going to get into the details, as anyone interested doubtless already knows them.

However, I thought that the official nationalization of the mortgage market at least deserved a mention here at the Nerd's Eye View.

Someone asked me how this would change the housing and mortgage markets. My initial thought is that it won't. This move was intended not to cause something to happen, but to prevent something from happening. That something was the imminent bankruptcy of the two entities that account for about 80 percent of U.S. mortgage issuance.

Such an outcome would have changed the game, to be sure, but now it's not going to happen. Mortgage rates may adjust downward a bit, but from a big picture standpoint, it will be business as usual. (That is, until the new government-owned entity starts writing down mortgage principal balances for defaulted borrowers and other fun unintended-consequence-inducing activities).

Business as usual, by the way, continues to be declining home prices.

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Submitted by capeman on September 8, 2008 - 10:33pm.

This should force home prices downward heavily if the Gov't entity decides to only buy 20% down, 36% DTI 30 years or better term loans. Hopefully for the taxpayers sakes they do.

Submitted by CA renter on September 9, 2008 - 2:14am.

Hopefully for the taxpayers sakes they do.


Like they care about us. If nothing else, this move proves they couldn't give a flying you-know-what about taxpayers (or those of us who've not speculated or committed fraud, etc.).

I'm seriously thinking about becoming flipper scum. Still seeing these useless leeches buying up foreclosures in the hopes of fleecing some unsuspecting, idiot buyer who doesn't do his/her research.

Though many of us have been on the "right" side of what's going to happen, seems we're still the losers.

Sorry, but this whole bailout thing sucks!

Submitted by Casca on September 9, 2008 - 9:16am.

It has been clear for more than a decade, that the GSE's were writing checks, that the American taxpayer was going to be forced to cover.

Submitted by Liz357 on September 9, 2008 - 1:04pm.

Lehman Bailout?
Unfortunately, we could soon have another bailout. Lehman Brothers is expected to go down. We'll see how this one is handled. Receivership? White Knight coming in? We'll know soon.

Submitted by JC on September 11, 2008 - 2:40pm.

Is this for real? Or, is this just more posturing?

Submitted by bubba99 on September 11, 2008 - 11:27pm.

It may be that F and F were nationalized not for what they did, but that they wanted to stop doing it.

There is some internet talk about congress being unhappy that F and F were starting to demand 20% down, good credit, PMI and the like. F and F were no longer willing to be the dumping ground for all of the mortgage crap from everywhere.

So in one fell swoop, the FED has an agency to handle all of the toxic crap from all of the banks and investment houses, and manage the foreclosures without any push back from F and F management.

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