The focus this month in the financial world is on Fannie Mae and Freddy Mac. The nations two largest sellers of mortgage backed securities, or MBS's for short. Mbs's are secured investments that Fannie and Freddy sell to investors at a price, very similar to a stock. In the past these investments were a great way for investors to diversify their portfolios with a steady flow of income at relatively low risk. They key term there is low risk... As the housing boom was taking off at the beginning of the millennium, the qualifying guidelines for mortgages magically seemed to relax and allow people with little to no credit purchase homes. Shady lenders pushed loan programs like negative amortization, interest only payments, and the dreaded adjustable rate mortgage.

The reason no one had a problem with this extremely lax system is simple, and in the end all comes down to money. Imagine that! The problem was that home prices across the nation were increasing at an alarming rate. Which got lenders thinking, "Hey, home prices are going up so fast does it really matter if people qualify for these mortgages? I mean if they don't make their payments and we do foreclose upon them we could actually sell the homes for more than what's owed on them!"

Brilliant...

Who would have thought that after unprecedented growth there would be a rapid adjustment downward to correct it? Many were obviously blinded by greed. Banks across America are suffering. Although, I will tout my Wells Fargo horn a bit here and say we have come out on top of all of this mess. Our strong ethical leaders did not pursue the path of the quick buck and are now in a dominating position in the market place.

Anyway I digress. Fannie and Freddy were showing strong signs that they were running out of money due to the large amount of foreclosures hitting the market. Our government got the gerbil wheel into high gear..."If Fannie and Freddy go bankrupt and there's no one to back mortgages we are going to be in some deep trouble!"

We probably would have spiraled into the worst economic times since the great depression had the good old government not stepped in and threw down some serious cash to keep things going.
Thankfully they did and this is what it means for me and you.

Lower interest rates on conventional mortgages, and we don't spiral into a depression.
The 30 year fixed mortgage is holding steady at about 6.00% . That's down more than half a point when the rate was at about 6.625% last month.

Rates are down and the government is giving first time buyers a $7,500 interest free loan if they buy a home in the next 9 months. Hmm... I think now might actually be a great time to buy!