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Fannie Mae and Freddie Mac have been taken over by the US government in one of the country’s most dramatic corporate bailouts ever.
A surge in mortgage defaults and a worsening economy have the forced the US government to take action with the crippled lenders.
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With nine per cent of Americans now behind in mortgage payments, or facing repossession, speculation has risen thet Fannie and Freddie face imminent collapse.
The lenders, which account for around half of US housing loans, reportedly have over $5 trillion of outstanding mortgage debt.
Jim Lockhart, director of the Federal Housing Finance Agency, said the objectives of the ‘conservatorship’ were providing stability to financial markets, supporting the availability of mortgage finance and protecting tax payers.
“Fannie Mae and Freddie Mac are critical to turning the corner on housing,” he said. “[They] are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe.” He said.
Published: 08-09-08
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