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The finance industry is met with guarantees

 

The home loan industry should begin to breathe easier as mortgage agencies Fannie Mae and Freddie Mac are backed with government guarantee.

The mortgage industry has been teetering on the heels of a complete disaster as speculation mounted last week that Fannie Mae and Freddie Mac could be forced out of business. Te companies combined to cover five trillion worth of mortgage backed securities, representing over half of the households in America.

Late on Sunday, the government rolled out a plant aimed at shoring up the financial stability of both companies. The moves should provide confidence to the battered financial markets. In short the government will provide both lenders the capacity to borrow funds up to 2.25 billion, allow the government to purchase stock in both companies to help with their capital ratios and allow the companies to borrow from the Fed discount window, and most importantly financially guarantee the certainty of both companies. These moves should provide improved confidence in the companies and act as a major financial boost for the mortgage lending industry.

The U.S housing industry has been falling at an astounding rate as home foreclosures continue to increase. A major driving force in stabilizing the housing market is ensuring that there is adequate lending options in place to encourage and stabilize home ownership. The agency lenders, along with the FHA are the only remaining entities that are purchasing mortgage securities and will play a crucial role in helping to stabilize the market.

7-14-2008 ? LoanNetwork.com

 

 

 

 

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