Sunday, September 7, 2008

U.S. Treasury Dept. Seizes Control of Fannie Mae, Freddie Mac

This week, the U.S. government will take over Fannie Mae and Freddie Mac -- the two organizations that fund the majority of mortgages in the United States.

They are being placed in a government conservatorship for the time being. A tough decision, but one that had to be made in the end. My concern is that people who gambled and used these mortgages to fund questionable investments will be bailed out. CASH ON CASH readers know my distaste for flipping houses and calling the process "an investment." Some estimates are that upwards of 50 percent of foreclosures are on houses in which the owner does not reside, but purchased for investment.

People who used these organizations for their mortgages and are living in homes they may lose due to the credit crunch, however, are people who deserve a helping hand -- in most cases.

In many cases, Fannie Mae and Freddie Mac made loans that . . . for lack of a better phrase, should never have been made. To risky, sub-prime home buyers who in most instances should never have been allowed "the dream" of home ownership. Because anyone could see what was coming. Many of us in the industry have been talking for more than three years about the events unfolding now.

Time will tell how this all sorts out.

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