It looks like a federal bailout of mortgage backers Freddie Mac and Fannie Mae may happen as early as today. “It could cost taxpayers billions.” It is reported that a million more houses will enter foreclosure in 2008 compared t 2007. Freddie and Fannie back more than half of the country’s mortgages.
I don’t see that there are any winners here. Maybe a few “I told you so”s.
The most prominent change we’ve seen in real estate when working with buyers is that mortgages are harder to get (and that the rules are constantly changing and you have to meet the latest standard, not the standard that you applied under). Obviously the stricter lending rules came once the horse was out of the barn. But will a loan made today prevent a repeat of what is going on now? Are today’s loans “good” loans for banks to be making or will we see another round of reform? Tougher scrutiny shrinks the qualified buyer pool adding to the vicious cycle of making it harder to sell a home. How close we are to the bottom of the market depends largely on how lending shakes out.
If our taxpayer dollars are going to pay towards the solution, is there a viable system for keeping some of these homes out of foreclosure in the first place? I’m against handouts but I’m also against ignoring the possibility of spending some money to save even more.