It has been a tumultuous week for Wall Street but it seems that calmer heads have prevailed for the last couple of days - let's all hope that trend continues. There has been a lot of negative speculation regarding the financial health of any company associated with the mortgage industry including most banks and industry giants Fannie Mae and Freddie Mac. The failure of IndyMac seems to have been the catalyst for the latest round of fears. The fear that Fannie and Freddie are going to fail is, in my opinion, greatly exaggerated. Unfortunately, once the rumors start, they can start to become a self-fulfilling prophecy when panicked investors start dumping their shares. That is why we have seen such a public effort by the Fed and the Treasury to put in place measures to assist both Fannie and Freddie should they start to see problems raising the capital that they need for their day to day functions. The odds that Fannie or Freddie actually need to resort to any of these measures appears to be slim - Freddie Mac has had two auctions of their mortgage-backed securities this week that went fine. Both the Fed and the Treasury realize that the media-driven negative perception of this situation needs to be addressed which is why such a broad-based contingency plan is being hammered out.

The bottom line is that both Fannie and Freddie are vital not only to our industry, but to both the US and Global economies as a whole. If the average homebuyer cannot access a mortgage at favorable rates, the US economy will come to a grinding halt and the Global economy will soon follow. It is my opinion that Fannie and Freddie will weather this storm on their own merits, as will most banks. However, it is important for everyone to know that the government will step in with appropriate measures to assure Fannie and Freddie's continued viability if the need arises.

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