Pensions Advice, Retirement Planning - Investment Financial Adviser Dunfermline, Fife, Scotland UK

Posted by William on September 12th, 2008 in Mortgage Advice

World markets have responded positively in the main to the news that US has effectively nationalised the two mortgage giants known as Fannie Mae and Freddie Mac. On Sunday the Secretary of the US Treasury Henry Paulson announced the takeover of these two huge American Institutions or GSE’s as they are known - meaning ‘Government Sponsored Enterprises’, a curious mix of both state and privately owned entities. Now overseen by the newly created Federal Housing Finance Agency on the heels of the Housing and Economic Recovery Act of 2008 - the move by the US treasury to buy these mortgage backed securities should help bring some stability back to troubled markets. Some commentators are even predicting a longer term rally, perhaps lasting a few months. Let’s hope so!

So Who Are They?

Fannie Mae is short for Federal National Mortgage Association. It was founded in 1938 at a time when it was very difficult to obtain funds for mortgages. It was a government agency until 1968.

Freddie Mac or Federal Home Loan Mortgage Corporation to give it it’s proper name was founded in 1970 to provide competition.Both these organisations do not actually lend money direct to mortgage applicants. Rather they they buy mortgages and sell them on to investors.

Nearly half the US mortgage is owned by them and this equates to roughly $6 trillion. Given this staggering figure it easy to see why the future stability of these companies is so central to US and World economics.

We shall wait with baited breath as to what the future for the beleaguered UK mortgage market holds on the back of this announcement, but even though things may be more stable in America after the rally on the Dollar the Eurozone may face choppier waters yet.

One thing is for certain here in UK - house prices continue to tumble and getting a mortgage without a substantial deposit and a watertight case regarding your finances is as difficult as ever for those desperate to own their own home.

Watch this space.