What if Freddie and Fannie were named Ferris and Faoiltiama?
What if Freddie and Fannie were named Ferris and Faolitima? Or Ferris Marc and Faoiltiama Madge, loosely translated in Norse and Irish origins as the warrior wolf that tried to eat the sun, and the wolf lady who soaked her nails in dishwater…
Do you think “Ferris” and “Faoiltiama” would have endeared themselves enough to Congress and the Feds to amass over 1/2 of the U.S. mortgage debt at the tune of 5 trillion in mortgages?
Because the names Freddie Mac & Fannie Mae sound so gosh darn cute and friendly, I believe their agencies were allowed to grow to such mammoth proportions because Congress and the government did not take them too seriously. But sun eating wolf and wolf lady with claws in dish soap (and a bow clipped charmingly above right fuzzy ear) aka Ferris Marc and Faoiltiama Madge— by the mere mention of their austere names— may have earned more immediate & constant scrutiny.
Well, too late for name changes as Freddie and Fannie are certainly being scrutinized now—albeit being “bailed” out of their own perceived credit availability problems while being “scrubbed”. I’ve tried to grab a pen and paper each time the radio gives an update on these government backed mortgage agencies so I could gain some very basic understanding and pass it on to you. Here’s what has piled up in my hastily scribbled notes—it’s been a heck of a task but I’ve kept pecking away, attemping to understand, because I want wanna-be home buyers to feel comfortable in investing in homeownership in this great city of Austin Texas (#2 in the nation as best city to purchase a home).
Who/what is Freddie Mac and Fannie Mae?
FM and FM are government “backed” or insured mortgage agencies that are a rare breed; e.g. they act like private companies with private management, boards of directors and shareholders, but they also have a sort of government status as the federal government provides private backing or insurance on the mortgages that these agencies have made to mostly low & moderate income families.
For the record, Fannie is much older than Freddie. Fannie was born in 1938 to Roosevelt and his new deal after the depression. FDR created Fannie to provide local banks with federal money to finance home mortgages in order to make more people home owners rather than box car riders.
And then Freddie came along in 1968 (which puts him in…what…the class of 1986)? Freddie is considered a GSE (government sponsored enterprise) with lovely protections from the feds in the form of lines of credit through the U.S. treasury, exemption from local and state income taxes and no review by the SEC (Securities and Exchange Commission). Sweet deal that.
What’s the big hub bub about FM and FM and why all the news now?
Freddie and Fannie “float” bonds in debt markets and they use the money they raise from this floating to fund mortgages and guarantee mortgages. FM & FM need investors to back these bonds, but investors have become a little nervous lately because of all the press about high foreclosure rates and consequently these investors have slowed their investments in Freddie and Fannie. The government has recently announced that a line of credit will be extended to FM & FM and they will be able to continue to support the mortgage market.
Will people planning on purchasing a home be affected by the current FM and FM situation?
Yes, in a good way now that FM & FM have received a credit extension. For sure, the credit markets are tighter now due to so many homes in foreclosure in large part due to mortgages that were made without proof of income, or not enough proof of income to support the mortgage, but as long as you heed some very basic advice from my years of home ownership (read this but find a professional mortgage lender for clarification & verification) you should be happy and cozy in your new home for as long as you are able to pay your monthly mortgage payments.
· Don’t consider an ARM (adjustable rate mortage) with initial low rates and low monthly payments because you’re SURE you’re going to get that BIG raise right around the same time that your rate is due to rise. Remember: stuff happens.
· Do your own “Can I afford it?” worksheet; be honest with yourself about all your debts and all your income. Remembering “stuff happens”, build in some “what if” scenarios.
· Shop for mortgages and work hard to understand what you are signing before you sign and accept a mortgage. Don’t pretend to understand what you don’t understand. You’re not asking for travel directions, you’re buying a home.
· Don’t ignore the reality of your mortgage rate and live in a dream world with the help of your new extra large plasma TV, because then, stuff will happen and you won’t know it until it’s kind of late to turn the stuff around.
I wish you well in finding your new home and obtaining a mortgage backed by Freddie and Fannie—or perhaps Ferris and Faoiltiama. Find a good Realtor to work with and an equally good mortgage professional–they’ll help you understand the entire home buying process.
Thanks for reading. Patti P. (Perhaps this is a good time to reveal my own complex surname that earns me a little scrutiny from time to time: for the record, it’s PRZYBYLINSKI.)
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