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California Mortgage Bailout
Most lenders support the the bailout of Fannie Mae and Freddie Mac, the two GSEs that provide the bulk of the money to US housing market, because without them the mortgage market would not function. A California mortgage bailout of other lenders does not have such wide appeal as the bailout of the two main GSEs. Despite the fact the bailout will cost taxpayers money, most feel if Fannie Mae or Freddie Mac were to fail that would provide a devastating blow to the economy and cost taxpayers even more money.
Most individual taxpayers may not be so interested in bailing out two companies that should have done a better job in reducing the risk they assumed. No one can dispute that Fannie Mae and Freddie Mac more poor judgements in some of the loan programs they provided. Like many portfolio lenders, Fannie Mae and Freddie Mac got caught up in the real estate boom from 2000-2006 and assumed the good times would never come to an end. The California Mortgage Bailout of Indy Mac in recent weeks, underscores the problems still prevalent in the banking and lending industries. Many pundits assumed in 2007 that by mid-2008 these problems would be long gone. However that has not been the case, and the problems facing the banks and lenders only seems to be getting worse.
Many feel there needs to be a strong message to lenders, that went to far and assumed to much risk, so that this never happens again. Most thought we learned during the S&L crisis about bad lending practices however that clearly is not the case. Tighter standards will be prevalent for years to come, and access to money to purchase property will not be as easy as it once was. The bailout of these two giants will hopefully be enough to stabilize the mortgage market and bring investors back the the Mortgage Backed Securities market as well.
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