Fannie May And Freddie Mac Gains Billions More For Lending

[May 17, 2008.]

 

In an effort to stave off additional damage created by the declining housing market, the U.S government has given approval for the two largest lending companies Fannie May and Freddie Mac to relax capital requirements. This move will free up an estimated $200 billion dollars that can be used for additional financing and lending practices that will hopefully ease homeowner’s financial burdens.

This step is only part of a larger initiative by the government to ease stress caused by the growing housing market collapse. As foreclosures rise, the need for some kind of intervention is needed. The additional funds freed up by this latest move will provide aid to those struggling. The U.S government is hoping that by providing additional funds the market will stabilize and fears of a recession will reside and build up consumer confidence which has been waning drastically since last year.

The U.S government would like to see both Freddie Mac and Fanny May carry a larger portion of the market crisis. Both of the mortgage lenders guarantees over $4 trillion in home loans and make them an important player in the growing financial crisis faced by consumers and investors.

Despite quarterly losses reported by both companies, they are confident in their ability to provide the needed assistance. "This is what Fannie and Freddie were put in place for." Richard Syron, Freddie Mac Chairman said, he continued to say "And we will deliver."

Whether or not this news will help bolster the confidence of borrowers and improve refinance rates is still unknown. However, as the months progresses the effects of this strategy will become known.

If need be the U.S government is prepared to initiate further aid and the Federal Reserve is planning to cut the interest rates again in late April.

With no hope in sight, many home owners are looking forward to the additional capital of Freddie Mac and Fanny May as a way to secure their loan and refinance under rates that are more agreeable to the current economic situation.