On August 8, 2008 I wrote about the eminent takeover of Fannie and Freddie Mac by the Government.   Well it seems like it is finally here.  It seems that something major will be released before the weekend.  New information being released just after both companies experience a major drop in their stock suggests that the plan is all but complete.  Once the Government takes the companies over they will have unlimited supplies of cash to originate new loans.  This will come courtesy of you the "Tax Payer". 

This creates a major shift in how our loans function.  When the Government takes both companies over it will be the Tax Payer who will carry the gain or lose from all mortgage loans serviced by the two companies.  The immediate future will be very bleak.  Foreclosure are still scheduled to rise regardless what the industry tell you.  We will not see the bottom till 3rd Quarter of 2009 or as late as 2nd Quarter of 2010.  After 2010 we will return to normal real estate growth of 5.9%, which was typical prior to the recent boom.  

What really worries me is that for the next two to three years the Government will incur losses from both companies that will be in the hundreds of billions.  Where will that money come from.  It will probably be added to the ever growing deficit.  We are deferring a problem that our kids and grandkids will have to deal with.  The Government of today is operating much like the typical American consumer.  Imagine the Government Deficit as a credit card or Mortgage which they keep using or refinancing until at some point there is no more credit available.  

Our next President  whether Republican or Democrat will enter a no win situation.  The history of the next office will be marred by the financial crisis we face for the next 3-7 years.

For some more information see news.yahoo.com/s/ap/20080906/ap_on_bi_ge/mortgage_giants_crisis