New programs designed to help the home owner should increase liquidity in the market place to the tune of $300 billion dollars. Banks are still not lending to each other and nothing stalls an economy like no money to loan. Fannie Mae will use the temporary increase in conforming loan limits to purchase jumbo-conforming mortgages under the same pricing structure accorded portfolio purchases of regular conforming loans. The higher limits will serve to include all those markets that are highly priced and add some liquidity for those folks in San Francisco, Manhattan, San Jose and other areas of highly priced markets. This is far from settling the more serious forclosure problem but it does nick away at real estate sales lows. Im guessing that the buyers in high priced areas have a better financial profile and that will help boost the overall portfolio of lenders, just a little.
Fannie Mae will increase its refinancing program for borrowers whose mortgage exceeds the current value of their home and purchase more loans from state housing finance agencies. In order to do this Fannie Mae will seek $10 billion in new money from stock and bond offerings. Market analysts wonder if this isnt balanced in a very delicate way, its possible for the se organizations to become top heavy with poor or non performing loans and actually further threaten the markets, since they are such an esseentioal part of the liquidity equation. Keep in mind that althougH Fannie Mae is a favored organization, the government is not obligated to come to their rescue. They are not government organizations and Fannie reported a $2.2 billion first-quarter loss and predicted losses will grow in 2009.
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