Greenspan recently warned that Fannie Mae and Freddie Mac are overextended, like the rest of America. What Fannie Mae and Freddie Mac do are to take US mortgages and bundle them and to sell them as securities. Greenspan warned that
"Greenspan warned that as Fannie Mae and Freddie Mac increase in size relative to the Wall Street firms that help them hedge risk, their ability "to quickly correct the inevitable misjudgments inherent in their complex hedging strategies becomes more difficult." Forbes.com, article by Virginia Citrano. See above link.
Econo-Girl's concern is with the attacks of Mother Nature on our Gulf shores, many people will not be paying their mortgages back. What effect would this have on Freddie's and Fannie's ability to provide low-cost mortgages to Americans? And what will that do, in turn, to the housing market?
2 comments:
I do not think the impact will be that great. Mortgages are usually long term deals, not 5 year car loans.
And the mortgage pools are national, not regional. This is why mortgage pools were created, by lowering the overall risk to the people who invest in the pools, mortgage rates can be kept as low as possible.
Not everyone will default. And not all the people who lost homes were homeowners. Renters and people living in government houses do not count when talking about the health of a mortgage pool.
As long as the rest of America keeps paying their mortgage on time, Fannie Mae and Freddie Mac will be ok.
But SOMEONE has the mortgages on those properties. And THEY are going to default.
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