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Last weekend the federal government seized control of the two troubled mortgage giants, temporarily putting them into a government conservatorship, replacing their CEOs and taking a financial stake in the companies. Treasury secretary Henry Paulson has said the eventual cost of the bailout is unknown and will depend on how long it will take the housing market to bounce back. But one government estimate says the bailout could cost taxpayers $25 billion.
Homebuyers in the Hilton Head area already are seeing lower rates, but shouldn't see any other changes in applying for a Fannie or Freddie conforming loan, local mortgage officials said.
Rates for 30-year fixed-rate mortgages were at 5.78 percent Friday afternoon, down from 6.14 percent a week before that, according to Bankrate.com, which tracks mortgage rates.
A few weeks ago, rates were around 6.5 percent, said Sam Cavanaugh, a mortgage banker with the Mortgage Network on the island.
The difference between someone paying at 6.5 percent and 5.75 percent on a mortgage of $240,000 is more than $100 per month, Cavanaugh said.
That difference already is interesting buyers.
"We're certainly seeing an uptick of referrals from (real estate) agents for people to get qualified (for a mortgage) before getting ready to look," Cavanaugh said.
From a practical perspective, the takeover has only positives for someone seeking a mortgage.
It has improved lender confidence, lowered rates and could eventually open up money in the jumbo market -- mortgages larger than $417,000, said Jim MacLeod, managing director of CoastalStates Bank on Hilton Head.
"There's a sigh of relief that we've reached the bottom," MacLeod said of the mortgage industry.
The main argument against the government's actions comes from those who are philosophically opposed to government meddling in free markets, said Chris Crowe, assistant vice president for BB&T Home Mortgage on Hilton Head.
Crowe sees the action as a good short-term move, but believes Fannie and Freddie will need to become privatized eventually.
One more potential advantage of the government action could be that the lower interest rates spur home sales in markets in Ohio, Michigan and other states with baby boomers seeking to retire, Cavanaugh said.
If shoppers are enticed to buy there because lower rates mean lower payments, that frees up the owners who want to retire to coastal areas such as Hilton Head, he said.
Tim Allen, director of the Carter Real Estate Center at the College of Charleston, said he normally would oppose government intervention in the market, but the failure of Fannie and Freddie would have been "disastrous" to the national housing market.
While the move reassures financiers and lowers rates for shoppers, it is "not big enough to trigger a real change in the market," Allen said.
The coastal real estate market hasn't hit its bottom for price yet and won't until sales start to take excess inventory off of the market, Allen predicted.
