Government Sponsored Entities become Government Controlled
By: David Gibbons, Zillow Director, Community Relations | September 7, 2008
Treasury Secretary Henry Paulson announced this morning that the federal government will take responsibility for controlling and capitalizing Fannie Mae and Freddie Mac (Watch the announcement on CNN). What were GSEs (government sponsored entities) are now GCEs (government controlled entities.) With tax payers and national debt underwriting the GCE’s loans, the goal is to restore faith in US mortgage bonds amongst international investors. It is a drastic move in the hope that mortgage rates will come down enough and that loans will become available to the point that the housing market will start to correct. I expect the mortgage guru’s will be recommending that borrowers float their rates if possible - and that they’ll be predicting that rates may fall this week in reaction to the news.
I’ll post the mortgage rate widget for you to track rates for 30 year fixed loans in Zillow Mortgage Marketplace tomorrow (I don’t think lenders post rate updates on Sundays - let me know if I’m wrong on that!)
- Stumble it!
- Categories: Home Mortgage
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DallasDirt » Blog Archive » More Takes On The Fannie Mae/Freddie Mac Move on September 8, 2008 8:31 am
[...] Zillow who says look for a cut in interest rates this week… (but will even that help sales??? [...]
jason on September 8, 2008 11:53 am
Rates are down 1/4% today, so were already sub-6% for the 30yr fixed. The bond (MBS) market is reacting strongly (positively) to the news about FNMA/FHLMC being placed in conservatorship by the Treasury.
Mark Zandi over at Moody’s Economy.com is predicting we’ll see the 30yr fixed get to 5.5%. He has a good track record of being right.
David, you’re right about mortgage rates not being posted on Sunday.
J Smith on September 8, 2008 12:01 pm
The problem is not mortgage rates, it’s that home prices are over-valued by 50%:
http://photos1.blogger.com/photoInclude/blogger/3019/1441/1600/boomtime.0.gif
Let the market correct so home prices continue their return to normal, rather than have taxpayer bailouts prop up irrational housing bubble home prices.
J Smith on September 8, 2008 12:03 pm
David writes: “the housing market will start to correct.”
The housing market already “started to correct” in 2005, and it will continue its correction back to historic price levels. See Robert Shiller’s home price chart for the last 100 years:
http://photos1.blogger.com/photoInclude/blogger/3019/1441/1600/boomtime.0.gif
Justin Bartlett on May 3, 2009 12:47 pm
Interests are amazing right now, on good days sub 5% on a 30 year term, so for those that have the equity, credit, and DTI to refi, this is a great time. Most homes have depreciated so much over the duration of the last year, that even homeowners who had a significant amount of equity and still have good credit cannot refinance. This has potentially horrific ramifications if the homeowners originally purchases / refi’d into an ARM that is going to adjust soon.
That being said, it may be just me, but it is my supposition that international investor confidence will increase when American investor confidence increases. Turning GSE’s to GCE’s will bolster some confidence, but most investors are not looking for a stable break even, but the highest, safest rate of return on investment….
As inflation of the dollar rises as we are pretty much printing money right now, that rate of return investors are going to expect to offset the increased inflation is going to go up. Lenders need to be profitable. Fannie and Freddie needs to be profitable. Then we will recover.