If you’ve been wondering what all of this Government takeover of Fannie and Freddie means, you’re hardly alone, so we just went ahead and copied what we just read to give you some different perspectives of what is being said in the real estate world. We take zero credit for this, it all came from the San Francisco Association of Realtors Advantage Online:

[Update: And we just discovered more info on Trulia].

“NAR: What the Government Takeover of Fannie Mae and Freddie Mac Means to Housing Industry

In short-term, home sales should improve as mortgage rates fall

Washington, D.C. (September 8, 2008)—The federal government’s takeover of secondary mortgage giants Fannie Mae and Freddie Mac should cause a drop in mortgage rates in the short term that benefits home buyers, but the long-term outlook is too early to call. NAR fully supports the action of the U.S. Treasury and the Federal Housing Finance Agency.

The federal government had no choice. The capital situation of the two companies was not enough to handle the fallout from rising mortgage defaults in the near future. In addition, investors who purchase Fannie Mae and Freddie Mac debt have lost confidence in the two.

In a statement, NAR commended the Treasury’s action, announced yesterday, to bring stability and continued liquidity to the mortgage market. “The plan will help restore confidence in the secondary mortgage market,” said NAR President Richard F. Gaylord. “We appreciate the steps taken to calm the market, make mortgages more widely available and protect taxpayers. We look forward to working with the administration and Congress to ensure the continued vibrancy of the secondary mortgage market.”

Summary of what the Treasury actually did and what it means

* In the takeover, Treasury placed the government-sponsored enterprises (GSEs) into a conservatorship—similar to a Chapter 11 bankruptcy—which fully protects taxpayers from conflicts of interest between taxpayers and shareholders or current management.

* The federal government is authorized to take up to an 80 percent stake in the companies, will review their financial condition quarterly, and inject money into the operations as needed. That means the market for GSE securities will be treated more like Treasury obligations, which should push mortgage interest rates down. That in turn, is expected to speed up home sales and help stabilize home prices.

* The GSEs will be allowed to increase their mortgage funding over the next year and a half to help stabilize markets. Starting in 2010, the plan calls for them to reduce their portfolios.

* The heads of Fannie Mae and Freddie Mac have been relieved of their duties. Treasury selected Herbert Allison, former Merrill Lynch vice chairman, to lead Fannie Mae, and David Moffett, former U.S. Bancorp CFO, to guide Freddie Mac.

Talking Points

* NAR, as the leading advocate for homeownership and housing issues, has closely monitored the market turmoil affecting the stock and debts of the two GSEs— Fannie Mae and Freddie Mac. Their mission is crucial to the economy to make fair and affordable mortgages available to home owners and home buyers. That mission must not be interrupted.

* Fannie Mae and Freddie Mac play a vital role in the U.S. economy by making fair and affordable mortgage loans available for home buyers and owners. That must not be interrupted. Treasury Secretary Henry M. Paulson Jr. and James B. Lockhart III, director of the Federal Housing Finance Agency that regulates Fannie Mae and Freddie Mac, have issued strong statements assuring the public that credit will continue to flow over the next 12 to 18 months.

* Short term, the takeover will result in government money driving down interest rates, which is expected to spur an increase in home sales.

* Long term, the action will lead to a major reorganization of the two GSEs as privately owned models. The brunt of that work will fall to the new administration and new Congress. NAR will help shape that process and the association is already working on a plan to do that.

* The action taking by Treasury and the FHFA, which regulates GSEs, makes clear the government will not let the deteriorating conditions of the GSEs disrupt the flow of capital to the housing sector, or harm the national and international financial system.

* The GSEs guarantee more than 40 percent of the nation’s mortgages and own or guarantee more than $5 trillion in mortgages. Since the credit crunch began in August 2007, the private sector mortgage securitization market has virtually disappeared and the market share of the GSEs has jumped to about 70 percent.

* NAR will continue to follow events closely and develop recommendations on the future of the GSEs’ mission to ensure there will be a robust secondary mortgage market in all markets.

For detailed information, visit http://www.realtor.org/gapublic.nsf/pages/gses_conservatorship?OpenDocument.

C.A.R.: Keep Fannie, Freddie

Takeover could lead to demise of fixed-rate loans, dramatic drop in homeownership

Los Angeles (September 8, 2008)—The California Association of REALTORS® (C.A.R.) today reaffirmed its support for Fannie Mae and Freddie Mac and their countercyclical roles, following the U.S. Department of the Treasury takeover this weekend. The government-sponsored enterprises (GSEs) provide capital to the mortgage markets and promote homeownership and housing affordability.

“While the short-term impact of the Treasury’s actions over the weekend served to calm the markets and restore confidence, in the longer term these entities need to be able to fulfill their historic mission,” said C.A.R. Executive Vice President Joel Singer. “A privatized Fannie and Freddie will short-circuit the countercyclical role the GSEs have played during precarious times in real estate markets.

“Without an institutionalized mortgage-backed securities market, mortgage capital will be less predictable and more expensive, and adjustable-rate mortgages could become the standard loan for home buyers, as could higher down payment requirements,” he said. “The 30-year, fixed-rate mortgage as we know it will no longer be readily available for most home buyers and may effectively disappear. The result could be a dramatic decline in homeownership rates in California and across the nation.”

C.A.R. is concerned that the Treasury, and Fannie Mae’s and Freddie Mac’s new CEOs, will overreact and change the mission and role of the GSEs. Wall Street and investors are understandably reluctant to buy mortgage backed securities (MBS) that are not either originated from or guaranteed by Fannie or Freddie.

The GSEs hold or have securitized nearly half—roughly $5 trillion—of all mortgages in the U.S., and in the current environment with private lender constraints, they account for the vast majority of all new mortgages in California.

“We have just recently begun to see an increase in home sales, currently at nearly 490,000 units on an annualized basis, up from 284,000 in the fourth quarter of last year. The most significant, reliable source of home loans in California today are financed by either Fannie Mae or Freddie Mac,” he said. “California’s and the nation’s housing markets simply cannot withstand the financial rug being pulled out from beneath them. Additionally, the repercussions this could have on the already weak economy could be devastating.”

C.A.R. is urging lawmakers to support continued government involvement in supporting the institutional secondary market and its role in creating homeownership opportunities.

“We applaud the U.S. Dept. of the Treasury for increasing the GSEs portfolio limits, but we will be asking Congress to enact legislation to ensure the two companies continue to fulfill their mission,” Singer said.

NAR: Near-Term Home Sales to Stay in Narrow Range

Washington, D.C. (September 9, 2008)—The level of home sales is expected to show little movement in the months ahead, according to the latest projections by the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, fell 3.2 percent to 86.5 from an upwardly revised reading of 89.4 in June, which had risen 5.8 percent from May. The July index remains 6.8 percent below July 2007 when it stood at 92.8.

Lawrence Yun, NAR chief economist, said home sales continue to edge up and down. “Pending home sales are oscillating month-to-month, with the long-term trend essentially flat,” he said. “Overly stringent lending criteria imposed by Fannie Mae and Freddie Mac in the past month no doubt held back contract signings.”

Even with the latest pullback, pending home sales have been fairly stable on a national basis for nearly a year, with dramatic local market differences continuing. “Contract signings have been steaming ahead, nearly doubling in activity from a year before in several California and Florida markets,” Yun said.

The PHSI in the Midwest rose 2.8 percent to 81.6 in July but remains 2.4 percent below a year ago. In the South the index was unchanged, holding at 93.7, but is 13.4 percent below July 2007. The index in the Northeast fell 7.5 percent to 73.6 in July and is 13.2 percent below a year ago. In the West, the index dropped 10.6 percent to 90.3 but is 6.5 percent higher than July 2007.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, California, said there’s been a surge in FHA mortgage applications. “Unfortunately, many people in high-cost areas aren’t familiar with FHA programs, which is why we produced a toolkit so REALTORS®, lenders, and other real estate professionals can familiarize themselves with this increasingly valuable program,” he said.

“FHA is taking a more active role in serving a broad cross section of home buyers, but it will take some time to fully get up to speed. We’re working with regulators to improve the process, and the good news is that this is becoming a big help to first-time buyers,” Gaylord said.

Yun said there are many ambiguities in the marketplace. “The economy is producing more, yet cutting jobs. A first-time home buyer tax credit and lower interest rates on newly conforming jumbo loans favors consumers, yet buyer confidence remains low,” he said. “Even with the Treasury Department’s direct intervention in the secondary mortgage market, it is unclear if we will go back to sound normal underwriting criteria, or if it will remain overly stringent. The housing market outlook is very cloudy.”

Yun mentioned that the speed and timing of a recovery depends on local market conditions. “Based on local market fundamentals, I expect robust home price growth in places like Denver and Houston over the next two years,” Yun said. “In addition, the frequent reporting of multiple bids in California and Florida may be signaling a bottom in home prices in these areas. Nationally, home sales are stable now but are expected to increase in coming quarters.”

Looking at middle-ground assumptions, existing-home sales are projected to total 5.01 million this year before rising 6.9 percent in 2009 to 5.35 million. After declining an average of 4 to 7 percent this year, home prices are forecast to rise by 2 to 4 percent next year.

The 30-year fixed-rate mortgage, which also has been moving up and down, should trend up to 6.6 percent by the end of this year, edging up to 6.7 percent in 2009. NAR’s housing affordability index is likely to remain favorable throughout 2008, averaging 13 percentage points higher than last year.”