Fannie, Freddie Plan Staves Off Disaster

While the ultimate ramifications for taxpayers remain uncertain, homeowners trying to sell today can thank the government for providing a backstop to Fannie Mae(FNM Quote) and Freddie Mac(FRE Quote).

Fannie and Freddie either own or guarantee about $5 trillion of residential mortgages, roughly half the amount outstanding in the U.S. If either government-sponsored entity were to fail, the ramifications for mortgage lending would be severe and housing prices would plummet further.

On Sunday, the U.S. Treasury temporarily increased the department's lines of credit for the two companies. The plan will also give the Treasury temporary authority to purchase equity in the two companies to increase their capital. Fannie and Freddie also now have access to the Federal Reserve's emergency lending window. ...