The treasury Department announced on Sunday that they are buying out Freddie and Fannie to the tune of $100 billion each - representing 80% of the companies. This step is good news for home purchasers as it is expected to lower interest rates for new mortgages though it will provide little relief for those already in trouble.
Think of this as the beginning of the end of the worst financial collapse since the great depression.
The plan to inject up to $100 billion in each of the government-chartered mortgage companies could not only help lower mortgage rates but, some investors are hoping, buoy the overall economy. The plan could help banks feel more open to write new mortgages and to refinance existing mortgages at lower rates, offering a possible lifeline to consumers struggling with increasing payments.
Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York, said while the plan boosts confidence in sectors like financials and home builders, it doesn't immediately alleviate worries about other areas of the economy. Still, he said the move was far more welcome than a collapse of Fannie Mae or Freddie Mac.
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