How the Fannie Mae and Freddie Mac Bail Out Affects You

The collapse of Freddie Mac and Fannie Mae that occurred on September 7, 2008 occurred because of company greed and consumer responsibility. Company greed led mortgage industry professionals to lure unsuspecting consumers into loans they could not afford and would not be able to maintain. Greed and responsibility led consumers to believe they could afford a home out of their price range and still be able to pay all their other bills. Consumers are partly to blame for the following reasons:

1. Believing everything a mortgage professional tells you without verifying the information
2. Buying a house you know you could not afford
3. Not reading the fine print on the mortgage documents
4. Lack of education about the home buying process
5. Forging documents (income, number of years on a job etc.)

Fannie Mae and Freddie Mac are partly to blame:
1. Allowing illegal mortgage loans to be approved
2. Approving consumers for homes they could not afford
3. Not developing plans to help consumers stay in their homes
4. Not being truthful with consumers during the home buying process
5. Not being truthful with consumers about the company's financial problems
6. Forging documents

Many of you may have considered or already purchased Fannie Mae and Freddie Mac stock. Don't. For each share of stock you buy, you will only get $.20 on the dollar, so if you buy 100 shares, you really only have 20 shares. Preferred investors with hundreds and thousands of shares will get $.50 on the dollar for each share owned.

Although the government is providing $200 billion to help Fannie Mae and Freddie Mac recover, it will take both companies several years to pay off the government loan. Share prices will not begin to rise a significant amount until the company begins to make a profit which could take years if at all.

Many of the mortgages Fannie Mae and Freddie Mac own will never be repaid which would have caused them to file bankruptcy if the government had not taken over both companies.

If you currently have a high mortgage interest rate or your ARM will expire within the next 6 months or year now is a good time to try to refinance. If you have bad credit, spend the next few months paying off debt and repairing your credit so you can refinance your home to ensure you remain a homeowner.

Since the government doesn't have the $200 billion on hand to bailout out Fannie Mae and Freddie Mac, someone has to come up with the money, who you ask? Us, the taxpayers by paying higher taxes. Show your frustruation, anger, disappointment and resentment during this year's election by demanding a change in how the government is run and how companies are run. One vote can make a difference.

There is one bright star as a result of the Fannie Mae and Freddie Mac collapse, executives of both companies will not get paid their the combined total $24 million severance pay.