Mortgage rates down after takeover
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Tough standards remain
The takeover of Fannie Mae and Freddie Mac is inherently political. Taxpayers ultimately will pay the tab if the transaction goes bad. That's why lending standards won't be loosened.

Fannie Mae and Freddie Mac, along with the mortgage insurance companies, have been tightening mortgage lending standards all year. They have raised down payment requirements, hiked fees and increased requirements for credit scores. It's harder to get a home loan than it was nine months ago. The federal government will not ease up.

Bob Walters, chief economist for Quicken Loans, says he doesn't expect lending standards to be eased "because I don't think the government is in a risk-taking mood. They already know they put the taxpayer on the line. They don't want to exacerbate that risk."

Where no impact will be felt
The government's action will have a beneficial effect on some mortgages, but not all. It will have little or no impact on jumbo mortgages -- home loans for large amounts -- because Fannie and Freddie don't buy, securitize or guarantee jumbo loans. (The definition of a jumbo loan varies, depending on house prices in each metro area. A jumbo is a loan of more than $417,000 in much of the country, and is higher in more expensive housing markets -- up to $729,750 in places such as Los Angeles.)

Because they are perceived as riskier, rates on jumbo mortgages have been unusually high for the last year. Historically, jumbo rates had hovered about a quarter of a percentage point above the rates for mortgages backed by Fannie and Freddie. Now they're about a full percentage point higher, and that gap is unlikely to fall soon.

The government's takeover of Fannie and Freddie won't affect rates on home equity loans or home equity lines of credit, either, because Fannie and Freddie aren't involved in the markets for home equity products.

Finally, the government's action won't reduce foreclosures or slow down the national decline in home prices. Neither foreclosures nor house prices were listed among the government's goals in this takeover, and there's little that the federal government can do about those issues, anyway.