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Fannie and Freddie: Do homeowners need them more than they think?

As you likely know, the state of the economy has not been easy on homeowners over the past decade, particularly for those who live in Florida. Many have had to file bankruptcy, and many have had to deal with their homes going into foreclosure. You may even be one of those who are still be experiencing the effects of the market crash and what it has done to homeowners everywhere.

One man in Miami, Florida, is one of many major investors who is participating in a lawsuit against the United States government. Their claim is that the Treasury Department confiscated their earnings after their bailout, helping put into place a harmful precedent for shareholders' rights by hurting them financially rather than helping them.

What does this lawsuit have to do with you?

Although this may seem like it applies more to corporations than the everyday person, the outcome could actually affect the real estate market and homeowners as well. How?

The fixed-rate, 30-year mortgage currently available makes owning a home relatively affordable for those in the middle class. The current administration in the White House is putting into effect a plan that some financial experts say could make this mortgage increase significantly in price or go away completely.

In this case, people who are buying homes for the first time - and many others - would find it much more difficult to buy a home. In addition, it could damage the equity that many individuals have invested in their homes currently.

The White House has said that its intent is to protect the taxpayers and that their action will not affect the fixed-rate 30-year mortgage, except to perhaps ensure that it remains available.

Will we know soon?

Since Congress needs to approve anything that goes through, no change is likely to happen until after the next election. If the group of investors wins in court, Congress could remain gridlocked, and the matter could be removed from the Treasury's hands entirely.

What is the matter of concern? The commonly known "Fannie and Freddie." Though their history is and they are controversial to some, they have played an important role by buying mortgages that have been issued by private lenders and banks.

These are two privately owned companies that are also backed by the United States government; Fannie Mae was created by Congress shortly after the Great Depression to encourage the formation of mortgages that were stable and meant to operate over the long term, and Freddie Mac was established decades afterwards to present competition for Fannie.

Depending on who you ask, Fannie and Freddie is to blame for the current state of the economy. Even if this is the case, it remains concerning what the loss of them could do to people who want to buy homes. After the recent trouble that many current and prospective homeowners have had, they should keep their eyes open for potential trouble on the horizon.

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