1 March 2010
The two federally insured companies that purchase mortgage backed securities, Fannie Mae and Freddie Mac, have announced 2009 fourth quarter losses of approximately $15-Billion. The two companies are reportedly planning on asking the Federal Government for more bail out funds. While some might say… “let them go under,” think about this first. Fannie Mae and Freddie Mac make up 70% of the mortgage loans throughout the United States today. On average, this year,  there are about $53,000,000 in mortgages across the country. Fannie Mae and Freddie Mac hold about $31,000,000 of the $53,000,000, with only a 3% default rate. If the Federal Government allowed Fannie Mae and Freddie Mac to go under, the housing market would not only slow down, it would disappear, and the impact on the overall economy would be devastating. Alternative solutions should be considered, solutions that would offer gradual changes to the system, rather than economy-killing one-time events.