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Could Freddie and Fannie be fini? ON YOUR STREET: Intervention by feds may have huge impact on homeowners and taxpayers.

Publication: San Francisco Chronicle
Publication Date: 12-JUL-08 		Format: Online
Delivery: Immediate Online Access

Article Excerpt
Byline: James Temple and Carolyn Said; Chronicle Staff Writers

The worsening plight of Fannie Mae and Freddie Mac set off alarm bells this week, as the ailing government-sponsored enterprises threaten to drag down the housing market further.

The congressionally chartered companies were created to increase home ownership and affordability in the United States. They inject liquidity into the mortgage market by buying loans, packaging them into securities and selling them to investors. Fannie and Freddie own or guarantee more than $5 trillion in U.S. mortgages, nearly half of all outstanding home loans.

The securities are not officially backed by the government, but the strong sense is that Uncle Sam would step in before letting the securities go bad. That allows the two companies to borrow at attractive rates and creates a stable, secondary market that helps ensure other...

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