Fannie Mae and Freddie Mac Offer Assistance During Housing Crisis

[Feb 10, 2008.]

The White House recently agreed to temporarily extend the size of mortgages Fannie Mae and Freddie Mac can buy, from $417,000 to almost twice that amount. Fannie Mae and Freddie Mac currently own or guarantee about half of all home loans in the country. Financial experts are hoping that the expansion of loans by the two companies will help to jump-start the troubled housing market.

However, it may be too simplistic to think that Fannie Mae and Freddie Mac can bail the nation out of its mortgage troubles. That's because the companies have yet to recover from the accounting difficulties that were first revealed five years ago. Because of tightening regulations, they have less freedom than they used to. As a result, they can hardly be considered the saviors of the U.S. housing market.

Mortgage analysts say the real culprit in the current housing mess is the overvaluing of properties. As a result, it shouldn't come as a surprise that home prices are dropping.

Economists are increasingly worried that the subprime mortgage disaster will plunge the nation into recession. However, a bipartisan agreement worked out by the Bush Administration and the U.S. House could go a long way toward resolving the problems. As House Speaker Nancy Pelosi stated, the agreement "is timely, it is targeted, and it is temporary. And it was done in record time."

The deal would mean money in the pockets of most Americans. People who pay income tax should get an advance of as much as $600 on next year's refund, while couples will receive up to $1,200. Bush Administration officials and Congressional leaders are hoping the rebates will encourage consumers to spend their way out of recession.

Still, not everyone in Congress is satisfied with the plan. For instance, the chair of the Senate Finance Committee, Senator Max Baucus, is holding hearings to assemble his own stimulus package.

Julie Ann Amos
Febraury 10th 2008

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