Fannie Mae lost $2.3 billion in the most recent quarter. This was worse than expected.
In a follow up story published Saturday in the Wall Street Journal, it is being reported that both Fannie Mae and Freddie Mac will be cutting back on their mortgage purchases in order to preserve cash. Worse yet, they will be shifting their purchases to fixed rate jumbos.
If you recall , several months ago the government raised the limits on jumbos for some markets. That did not affect the Twin Cities. Our conforming loan limit remains $417,000.
Fannie and Freddie have almost single handedly supported the US mortgage market in the past year. I don’t have the exact statistics, but I believe their market share of mortgages purchased jumped from some 40% of the market to 70% of the market. While it would seem okay if they started to move back toward a 40-50% marketshare, it’s not clear who else would be a buyer of mortgage backed securities given the virtual collapse of the mortgage business and Wall Street.
The net result is the American consumer is likely to spend more on getting a mortgage.