Fannie Mae and Freddie Mac were bailed out by the U.S. Government this week.  What does it mean to you? Not much on the surface, but you will see interest rates on mortgages drop. Rates already fell about 1/2% but we likely will see a little more of a drop.
The plan to bail them out involves 4 steps. 1. Buy peferred shares to increase their liquidity, 2. Provide a secured lending facility, 3. Decrease their portfolio size beginning in 2010 and 4. buy mortgage backed securities. Of these 4 dteps, the buying of mortgage backed securities will help rates and restore the confidence we need to get the housing market moving again.
This was a badly needed step, if it had happened 12 months ago alot of housing market pain might have been avoided.
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