Seizure of Fannie and Freddie...

Great article from The Realty Times...

The dramatic seizure of Fannie Mae and Freddie Mac by the federal government has had no downsides for real estate -- although it could ultimately cost taxpayers billions if the companies' loan portfolios continue to bleed red ink. So how does that all sort out for individual home buyers, sellers, builders and real estate professionals?

Here's a quick overview with a Washington perspective: Fannie and Freddie provided -- and will continue to provide -- liquidity to the American home mortgage market … that is, plenty of money for qualified buyers and refinancers.

They're not going away. Only their top brass pulling down eight figure annual salaries and $100,000 country club membership perks are going away.

And most lamented of all in the corridors of Capitol Hill, the two companies' notoriously generous political action committees, which put $3 million into the campaign coffers of carefully selected congressional and Senate leaders in recent years, are going away.

Ironically, although Fannie and Freddie claimed that they lowered mortgage rates, the reality is that the biggest impact they ever had on ordinary folks' interest rate quotes was when the feds busted in and took them over.

Rates dropped anywhere from half a point to three quarters of a point within the first week, slashing hundreds of dollars off monthly principal and interest payments for thousands of home buyers and refinancers who rushed to lock during the free fall.

Government rule of the bankrupt companies is likely to extend through 2009 -- or as long as it takes for Congress and a new administration to figure out how to reconstruct them.

In the meantime, it should be pretty much business as usual for new borrowers. But don't expect federally-run Fannie and Freddie to get out front and innovate with lower downpayments or easier underwriting standards.

Anyone needing a really low downpayment or more consumer-friendly credit to buy a house will need to turn to FHA, not Fannie or Freddie. Between now and January 1, FHA will be able to do 3 percent down loans of up to $729,750.

After January 1, FHA will offer 3 and a half percent downpayments on maximum loans of $625,500. Fannie and Freddie will have the same upper limit for high-cost areas, but won't be able to come close on downpayments or credit standards.

Bottom line: Weep not for Fannie and Freddie, who drove themselves into bankruptcy. Instead, raise your glass and toast FHA. It's been around since the Depression, its leaders aren't paid millions, and for many home buyers it's going to be the only game in town.