Posted on: Thursday, June 12, 2003
Experts fear fallout from investigation
|||Freddie Mac faces criminal inquiry|
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Freddie Mac and its larger sister, Fannie Mae, both created by Congress, buy home loans from banks and other lenders to supply cash to the multitrillion-dollar home-mortgage market.
They buy mortgages from lenders to keep in their portfolios and package others into securities for sale on Wall Street.
Investors from around the globe buy the securities, with a large chunk of them held by Japanese and other Asian investors.
Some lawmakers and financial experts are concerned that the turmoil and uncertainty engulfing Freddie Mac could cause the banks and lenders to sell fewer mortgages to the company and also possibly to Fannie Mae.
The international stream of capital into the U.S. mortgage market could thereby be reduced, likely pushing mortgage interest rates higher.
People with locked-in mortgage rates wouldn't be affected, but prospective homeowners or those seeking to refinance their mortgages could see higher rates.
The housing market has been a rare bright spot in a gloomy economy in recent years.
Federal Reserve Governor Susan Bies said yesterday that Freddie Mac's accounting travails haven't had an immediate effect on the U.S. banking system or the housing market and that consumers shouldn't feel any negative effect.
She cautioned that there could be some longer-term effects, saying "We'll just have to wait and see what happens long-term when the facts come out."