Despite all of the depressing news on FNMA and FreddieMac, interest rates have gone down just a little bit more. This is surprising considering the fear of what could happen in the near future with these two establishments.

Okay, I walked away from writing this blog entry to go into a quick office meeting, and rates went up! This is what I mean by saying that rates change two or three times a day.  What is affecting them today.  The fear of inflation and the raising of interest rates to curb it.  This will cause even more problems for homebuyers.  Not only is it harder to get loans, but the rates will be higher.

If you do not know, Fannie and Freddie are the two largest purchasers and servicers of mortgages in America.  They were originally established by the government after the depression to give banks some stability in lending.  They became so large that they were spun off into private companies.  Over the past few years they had their share of corporate problems and were hit very hard by the credit crunch.  Now teetering on insolvency, the government might have to step in and bail them out.   I am not sure that the government would know what they are doing if they have to step in. I think that Paulson is probably aware of that fact because he is saying that the companies should stay the course.  

If these two companies fail, will our economy severely collapse? I think for a time, the ripple affect would be maddening and global.  It could be the straw that breaks the camel’s back as they say.  The issue is, how much can the average consumer withstand until the damage is permanent?

Isn’t this depressing?  I am going away next week for a bit of a reprieve. I will of course have my staff on top of everything and will be accessible via email 24/7. Those of you with active loans in the pipe, feel free to reach out and touch. Check out the pictures from the blog posts next week to figure out where I am!

Have a great weekend.

Dale Siegel