South Florida Bankruptcy Lawyer

Fannie Mac and Freddie Mac

Created during the Great Depression, Fannie Mae was chartered by Congress as a means of helping American families own homes. Its brother company, Freddie Mac, was chartered in 1970. Eventually both became privately owned corporations traded on Wall Street.

The purpose of the companies is to help homebuyers; however, neither actually loan money. Both Fannie and Freddie buy mortgages from banks and other lenders. They then group these mortgages into bonds and sell them to investors with a guarantee to be paid. This frees up the risks banks have with non-payments, allowing them to lend more money.

An unstable economy plagued with speculation has led Fannie and Freddie into some trouble. Evaporating mortgages, climbing foreclosures, and fluctuating interests rates threaten both companies. The Federal Government recently announced that they may be stepping in to save them. Both the Treasure Department and Federal Reserve plan on making funds available if necessary

What it Means for You

If you are a homeowner, this could be good news. Efforts by the government will eventually result in stabilized housing prices, because Fannie Mae and Freddie Mac are crucial to the well-oiled operations of the mortgage underwriting industry.

If you are concerned about the safety of your money in the bank, know that you are insured to an extent. The Federal Deposit Insurance Corp guarantees traditional bank accounts up to $100,000 and individual retirement accounts up to $250,000. Larger amounts are not guaranteed if a bank fails. The FDIC will cover 50% of uninsured balances in the event of a bank failure. It is a good practice, however, to limit your bank accounts to the insured amounts.

Is bankruptcy threatening you? For a review of your case and legal options, contact the South Florida bankruptcy lawyers of Eric N. Klein & Associates P.A. at 561.353.2800.