Will Fannie Mae and Freddie Mac Impact Australian Business Owners?

The big news is that the U.S. Fed took over Fannie Mae and Freddie Mac. These quasi-government agencies, publicly owned and actively traded, are market makers within the US housing sector, providing and guaranteeing mortgages. Both agencies made home ownership in America possible – the realization of the proverbial American Dream.

Unfortunately, the housing market in the U.S. is in the tank with existing home sales at their lowest levels in more than 20 years and property values in steep decline thanks to simple supply and demand. U.S. realtors like to see a two to three month inventory of properties, indicating an active market. Current inventories of existing homes are over 12 months in some portions of the U.S. – especially the high-priced east and west coasts.

Fannie Mae lost $14 billion in the past 12 months, leaving bondholders and shareholders wondering if their positions were secure. This seriously depressed world markets because Fannie Mae and Freddie Mac were always solid financials – until the U.S. housing bubble burst in 2005. Prices have dropped 30% in the Las Vegas area and across America’s expanding Sun Belt alone.

The Feds to the Rescue

Well, fear not shareholders and bond holders. Your paper is safe. This past weekend, the U.S. federal government took over the operation of these two lending giants, and thus guarantees all of that outstanding paper.

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