Hilde's Mortgage Blog

Treasury Secretary Henry Paulson made a tremendous move in putting Fannie and Freddie into conservatorship.

The bad news is the realization how seriously damaged both entities had gotten during the past 18 months.

Fannie/Freddie issued mortgage backed bonds of about 12 Trillion. Allowing them to fail would have been disastrous.

There had always been the assumption of the implied government guaranty of those bonds and now that assumption is actually confirmed.

The impact on bond investor confidence is already hugely apparent. Just last week one of the biggest bond investor came out saying they will not buy any mortgage bonds of any kind. Now with this news they have again stepped up and are buying mortgage bonds. Mortgage rates already tumbled about 3/8% and may drop more. Also, there may be some upticks on the way.

In addition the Mortgage Bankers Association is approaching the new Fannie/Freddie regulators regarding the recently increased guarantee fees implemented risked based pricing fees. I am hopeful that those add-on fees will be reduced some and make conventional loans more affordable again. We may see a wave of refinance opportunities and lower payments for home buyers.