Economics and the neutrals watched and waited to hear the announcement, of the greatest financial bailed out offered by the US treasury, in taking over the crippling debts of Fannie Mae and Freddie Mac, two of the biggest names in the mortgage housing sector, but the dilemma for one corporate business association, presents another opportunity for government seizure.
Spare a thought, for the way the housing market is going, conditions are favorably to savers rather than for home buyers, making the prospect not particular good for those facing a bleak winter of financial uncertainties, to buy a house now requires a large deposit to sure up the loan application, but years gone by Fannie Mae and Freddie Mac would have made the accquisition possible.
However, today if after purchase completion, buyers are unable to make regular loan repayment, it won't be long when the doors are closed in foreclosure for those unable to meet their mortgage obligation, and the keys of the vacant kingdom are handed to another occupier at reduce rates.
Hence, the government is the new proprietor, becoming the financial underwriters of the mighty fallen housing entrepreneurs, Fannie Mae and Freddie Mac, the surprising of course, was unprecedented, never in history was a company bailed out of the darkest hole, it was a move that characterize the importance of the housing market.
This was no ordinary speculative bombshell, hearing about the dismal news about the mortgage pioneers that are known worldwide, Fannie Mae and Freddie Mac, is the twin engine of mortgages, consortium giants woven into the fabric of American society.
For years they have been the bed rock of stability, and it is great news to hear that the treasury has intervene to rescue the giants that were in financial disarray, home owners have stroke the pains of displeasure over the past ten years paying for houses that are well over valued, some people have not yet reap the fruits of their reward, while others perched nervously on the pinnacle of trade winds.
Having mortgaged themselves to the hilt, and as a result, home owners are having negative equity, which simply means, the value of the house price has fallen from what it was originally valued at, leaving loan payers with very large sums of money to fork out each month on properties that are now well under what they initially were.
With the housing slump continuing, mortgages are not worth a great deal today as they were back in 2006, when the slump started to take affect the economy, trade deficit came into play, and speculation of a steady stream of income was encouraging, but as the oil prices increased, the value of houses began to drop 5% at first, by 2007 another 15% of the value of houses fell sharply, and the knock on effects took place with further increase in food and energy prices.
However, Fannie Mae and Freddie Mac remained optimistic that they were able to weather the storm, with history on their side, it was hard to see them not pulling through, and plug the gaps with holes to stop the leakages, it goes to show that we cannot take any financial matter for granted, it may have happen prematurely, but their inept action proved there undoing, and consequently they lost more than a truck loan of cash.
Along with their previous consistency in providing more than half the mortgages in the US, their reliable reputation has been ripped to threads, the company share prices took a massive tumbling for the worse, unlike any other mortgage companies, who may have had other investment to sure up their securities, Fannie Mae and Freddie Mac had lost so much equity, their balance books was in a total mess, eventually under the unbearable weight of lost revenue, the twin engines stalled, and a rescued mission from the treasury had to be quickly enforced to prevent complete disaster.
The world at large was aware of the reputation that Fannie Mae and Freddie Mac had develop over the years, but not as closely align to their situation, as those home owners who are paying back over the top higher rates on loans, and seeing the possibility of foreclosure starring them smack bang in the face, defeat is not an easy thing to accept, but if they can walk away from near disaster with half their integrity and dignity intact there may be hope of a great revival, but it's doubtful the way the market is at the moment, there is a sense of uneasiness in the atmosphere.
Cutting interest rates has stimulated the market a little, and banking opportunities are holding steady, it appears that we will always be going back to the economy to examine pressing mortgage issues, $350,000 houses have plummeted in value, to around 25% off, in some states the drop is worrying, working home owners need more of a stimulus package to see a rejuvenated surge in house value, the deficit that they are facing with their mortgage payments can so easily be blamed on Fannie Mae and Freddie Mac, who sold most of these mortgages in the first place.
There is no doubt, that the lenders guidelines used to assist in applying for mortgage loans has worked successfully over the years, but since 2006, working family income has dropped by inflation adjustment, with even worse fears to come, in the way of job losses, and the disadvantage unfairness dished out to first time buyers who are trying desperately to get on the housing ladder.
Economists, fearing an economic slide may wipe out more stock prices, are looking at ways to assist loans payers especially those obligated to Fannie Mae and Freddie Mac, but it is coming up to decision time, when they may have to decide whether it is worth selling up and cutting their losses, or press on through the stagflation hoping for the best. The current problems encountered by those bearing up to negative equity, may be an uncompromising dilemma for some, but for others, it may be a passport investment opportunity.