What the Government Mortgage Bailout Means to You

I'm not revealing any great secret by writing that the housing industry is in the midst of a major crisis. From countless foreclosures to lack of work for those in the construction business to the affected banks and mortgage companies who will never recover their money, many people in this country are affected by the crash in one way or another. The federal government decided this week to bail out the two largest mortgage lenders, Freddie Mac and Fannie Mae, and their names are now being mentioned on the evening news as much as Obama and McCain. How will this government intervention affect you? Let's take a look.

As a taxpayer, this bail out should not be welcome news to you. With the initial price tag placed at $300 billion, the cost breaks down to $1000 per taxpayer. Personally, I would prefer to spend this amount of cash on a nice weekend getaway or some charitable donations of my choice instead of saving a failed business. But, the government has decided that the overall health of the housing market will be improved by providing this assistance with our money now.

On the other hand, if you are in the market for a mortgage, the bailout of Freddie Mac and Fannie Mae has brought some welcome news. Mortgage rates are already down half a percentage point, with lenders taking some comfort in the fact that the two major mortgage giants are to remain in good standing.

Regardless of how you are personally affected by this bailout, the collective repercussions will be felt for some time to come. As Axel Merk, manager of the $400 million Merk Hard Currency Fund, said, “These bailouts will add up. The next (presidential) administration may get its trillion-dollar deficit. The winners will be the irresponsible ones who piled up on debt. The losers are retirees that have been saving and see their purchasing power erode.” What a rosy picture of the future!

If you have questions about how the financial health of Freddie Mac and Fannie Mae will affect you, or if you are looking for ways in which to make the most of this difficult situation, please contact me and let's discuss how my custom coaching sessions can work for you.