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Government Take Over Planned for Fannie Mae & Freddie Mac
Fannie Mae and Freddie Mac will soon be taken over by the government, possibly by Monday. The move is
in response to save the ailing mortgage market, which both real estate giants together make up 1/2 of
the United States mortgage debt. Unfortunately, this may cost up to twenty-five billion dollars for taxpayers.
The news came after it was announced that over four million homeowners in the U.S., almost ten percent, are
behind on their payments, or they are already in foreclosure. The news confirmed that the mortgage crisis is now
affecting homeowners who once had good credit and took out additional large loans without proving their assests or
their income.
The two companies lost a total of more than three billion dollars in three months. This was brought on by
loans that eventually ballooned making it impossible for these homeowners to make their payments.
Initially, both companies thought they would be able to withstand their losses, but with foreclosures increasing
their ideal has slowly withered away. A couple of months ago, Congress agreed that they would give loans
on an unlimited basis to both companies, as well as, buying stock in them.
As of now, the government is planning to take control of both companies for a minimum of a year while it
decides whether or not to continue to run it as a government entity or attempt to restructure it in
some way. In addition, both CEO's for Fannie Mae and Freddie Mac are also on the chopping block, however, all the
details have yet to be released.
Fannie Mae and Freddie Mac guaranteed nearly 3/4 of the recent mortgages in the 2nd quarter of 2008. This number is up almost
50% from 2006.
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