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Mortgage giant takeover good for local borrowers
By Michelle Koetters
mkoetters@pantagraph.com
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BLOOMINGTON -- Local mortgage rates took a dive Monday following the government takeover of industry giants Fannie Mae and Freddie Mac.

Long-term implications, and whether rates move further down or go back up, will play out as the days pass, but the decreasing rates — a half of a percentage point at least at two area banks — are a positive development in a troubled nationwide mortgage industry and could spur more people to buy or refinance a home in the Twin Cities, local bankers said.

“The rates have taken a nice drop,” said Scott Swope, senior vice president of Flanagan State Bank in Bloomington. “It’ll be interesting to see if that continues or it that’s a knee-gut reaction.”

Earlier this summer, investors worried about the financial stability of Fannie Mae and Freddie Mac. On Sunday, the federal government announced the shift in control, taking over the companies in a move designed to protect the market from the failure of the companies.

They own or guarantee about $5 trillion in home mortgagees, about half the nation’s total.

Economists have predicted that 30-year mortgage rates, averaging 6.35 percent nationwide, could drop to close to 5.5 percent.

Some potential homebuyers might be pushed out of the real estate market after the government’s action, though.

Already, Fannie Mae and Freddie Mac have tightened some of their lending standards, such as credit score requirements.

“If anything, the standards could tighten a little bit further,” said Steve Timmermann, vice president of First Farmers State Bank in Bloomington.

Mortgage rates dropped Monday as investors become more encouraged to put money into mortgage-backed securities after the companies received the government’s backing, Swope said. While too many factors drive rates to predict the future, mortgage rates at least dropped throughout the day at Flanagan State Bank, he said.

A 30-year fixed mortgage dropped from 6.375 at the end of Friday to 5.875 Monday, he said.

Rates dropped from last week’s 6.5 percent rate to 6 percent Monday at First Farmers State Bank in Bloomington, said Timmermann.

“We’ve seen a nice improvement,” Timmermann said. “That’s a significant drop.”

But no one knows for sure if that trend will last for a few days or longer, or whether rates will drop more, stay steady or go back up in a couple weeks, Timmermann said.

“Until you really see it, it’s just prediction,” he said.

The drop in rates could bring more people to at least look at buying or refinancing a home, Swope said. Nationwide, home prices have to improve before too much movement starts to take place, though, he said.

Other economic concerns, like employment uncertainty, also could keep buyers on the sidelines, Timmerman said. People also have to evaluate their individual situations to decide if they should refinance, he said.

“You have to put pencil to paper. Everybody’s situation is different,” Timmermann said.

Take a look
In this Aug. 13, 2008 file photo, a foreclosed home sits empty in Chandler, Ariz. A record 9 percent of American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June, as damage from the housing crisis continues to mount, the Mortgage Bankers Association said Friday, Sept. 5, 2008. (AP Photo/Matt York, file)
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Reader comments on this story - 11 total

Note: All views and opinions expressed in reader comments are solely those of the individual submitting the comment, and not those of the Pantagraph or its staff.

420 wrote on Sep 21, 2008 9:45 AM:

" Well with the government spending trillions a month on useless wars that are never going to solve a dang thing (other than to kill inoccent people) the least the government can do is give something back to it's own people!
I see billions sent out in aid a month to other nations not to metion the weapons deals our government is par taking in, yet when the govenment talks about helping our own, people complain?
This nation realy has went to the dumps... "

Not so Political wrote on Sep 9, 2008 1:43 PM:

" what did i do wrong 2 people agree with me, guess i should run for office now. NOT HA HA. "

dick daley wrote on Sep 9, 2008 10:01 AM:

" To Follow the Money:
FNMA and FHLMC are publicly traded companies. Many GSE's are. "

Mike wrote on Sep 9, 2008 6:20 AM:

" Sorry, but on this one they should let them go broke. I should not be required to pay for some fool that jumps into a lake and can't swim. You can't teach stupid much less reward it. Simple really. "

follow the money wrote on Sep 9, 2008 6:11 AM:

" The problem with Fannie and Freddie is they were govt backed in the first place. They didnt have to follow the same rules that all other publicly traded companies do/did. So its not that much of a surprise to see them in trouble. "

fyi wrote on Sep 9, 2008 5:13 AM:

" "They own or guarantee about $5 trillion in home mortgagees, about half the nation’s total."
Uh, NO...actually, they hold slightly over $12 trillion. "

cats55ire wrote on Sep 8, 2008 11:24 PM:

" Plain and simple . . . SOME people don't want to take responsibility for their actions!!!!!

Just a thought to SOME home buyers now in trouble financially - establish a budget BEFORE you buy the house and take into consideration how much you can afford to pay for a new home AFTER buying other important bills. SOME people are living too "high on the hog" and above what they can afford . . . .

NOTICE I SAID SOME PEOPLE!!!! I should not have to "bail" out others for not living in a modest home with a resonable mortgage. . . . . "

Dave wrote on Sep 8, 2008 10:41 PM:

" Ron Paul predicted this a year or more ago. Now the federal government is basically controlling all home morgages in America.
We have more government involvement now and more laws in America than Russia had during the height of communism. Yet us Americans just go on like sheep to the slaughter without a clue about what's happening to us and our freedoms. "

deanwormer wrote on Sep 8, 2008 10:27 PM:

" couldn't agree more with not so political. i worked hard, planned for a year about building a house and how to pay for it, and knew it was my responsibility to pay for the house i built. didn't blame any company about their rates, payed attention to what the rates were doing. did what i was supposed to do to afford and pay for my house. why should i now have to my tax dollars go to bail out the mortgage companies but moreso, help to bail out stupid buyers who failed to take responsibility for their actions. they are just as much at fault as the mortgage companies and should be held responsible for their own actions. "

McLovin It wrote on Sep 8, 2008 10:26 PM:

" Not so Political...I think this is the first time you and I have agreed on anything! I echo your sentiments exactly. "

Not so Political wrote on Sep 8, 2008 8:59 PM:

" Isn't this great, a business takes a dump and the tax payers have to bail it out. Think I should start a business and go make a ton of money, pay myself all the profits than make the business go broke so the govenment will bail it out. "
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