Fannie & Freddie. The Short & Skinny.

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Over the weekend, I spent some time on the phone with one of my good friends who trades mortgage backed securities for a living.  We talked extensively about the “secret” meetings that were being held over the weekend between the executives of Fannie and Freddie and government officials.  What was clear was that the futures market was looking up, and all the banks with significant exposure to Fannie and Freddie mortgage bonds, were looking like a major options play for Monday. 

Now that Wall Street has closed for business this Monday, September 08, 2008, let’s see how a few of the major banks performed:

  Citigroup, up 6.65%

  Wachovia, up 13.37%

  Fifth Third Bancorp, up 4.58%

  SunTrust, up 12.34%

  Regions Financial, up 10.37%

  Wells Fargo, up 7.56%

  Bank of America, up 7.75%

 

What a surprise! Wall Street and global stock markets loved the news and everyone jumped on the “let’s enjoy another government” bailout bandwagon.  Many experts are saying that this is going to give the mortgage market the much needed longer-term stability that it needs.  Others are also starting to talk about easing up on lending restrictions, lower fees and interest rates.  Is that not the very thing that got us into this mess in the first place, easy and cheap money!

 

So what’s in it for real estate market in Miami?  The good news is that I think we will see some lower mortgage rates.  The bad news is that the federal government is going to pay for it using your tax money.

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