RISMEDIA, Sept. 10, 2008-(MCT)-News of the federal government’s seizure of the nation’s two largest mortgage financing companies gave stocks a bounce this week and offered a glimmer of hope that the housing market will regain its footing, but economists and industry experts are split about how and when the takeover will affect taxpayers and consumers.

Consumers saw one potential gain Monday from the government’s weekend bailout of mortgage giants Fannie Mae and Freddie Mac, as mortgage rates dropped about a quarter of a percentage point. But it was not clear that the takeover would free up mortgage money to ease the credit squeeze-which would help people buy houses that have languished on the market at reduced prices.

“In the short run, you might actually see some contraction” in available credit because of tightening lending standards, said Bob Walters, chief economist for Livonia-based Quicken Loans. But, he added, “in the long run, the fact that the government is stepping in to provide liquidity might help. But that’s going to take a while.”

Said Walters: “The real impact here is prevention. Had Fannie or Freddie failed, it would have been pretty catastrophic. What people don’t see is the real benefit.”

Both Fannie Mae and Freddie Mac are government-sponsored enterprises, or GSEs, which were created to help make home mortgages more affordable for homeowners. The companies buy mortgages from lenders and repackage them as securities they either sell to investors or hold. Many experts hold the view that loan rates will begin to decline because Fannie and Freddie will step up their buying of mortgages.

“The home buyer will not be harmed by this takeover and probably will be helped. The government can orderly liquidate” the two companies, said Richard Thomas, president of Sierra Mortgage in El Paso. “If they had shut down, it would have been catastrophic. The world would have come to an end. The mortgage market would have probably dried up completely” until the private market took over, he said.

Clearly, the takeover won’t solve the broader housing problems in Michigan and elsewhere. Slack sales, falling home prices, a collapse in new construction and a tidal wave of foreclosures following the subprime mortgage bust have burdened the U.S. housing market in the past couple of years.

Even so, a collapse of Fannie Mae and Freddie Mac and a drying up of mortgage money would have made all those problems much worse, Dana Johnson, chief economist for Dallas-based Comerica Inc., said Monday.

“I think the important point to make is that the whole intent of this is for the consumers not to notice,” he said of the bailout. “They would have noticed hugely if there had been a collapse of Fannie and Freddie, because it would have become very, very difficult for most consumers to get a new mortgage.”

Monday’s interest rate drop reflected investors’ easing worries over the fate of the two giant lenders, who together account for half or more of the money available for mortgage loans in the country. Fewer worries on Wall Street meant bankers on Main Street could lower rates to consumers. Many lenders were quoting rates Monday for 30-year, fixed-rate mortgages in the 6% range.

Eric Burgoon, senior vice president in Bank of America’s Troy regional headquarters, said it wasn’t clear how long the lower rates would last.

“Whether that’s a forever thing or a new level, it’s hard to say, but at least initially, we’ve seen a reduction in mortgage rates,” he said.

Consumers may notice one slightly more painful result soon. The government bailout means that terms are tightening for home-equity loans and other mortgage-type products.

In home-equity loans, Walters said, consumers will be able to borrow about 5% less against the value of their homes, based on the tighter standards set by Fannie Mae and Freddie Mac under government control.

The FHFA will run the conservatorship, according to the government plan. Lockhart immediately ejected Fannie Mae Chief Executive Officer Daniel Mudd, 50, and Freddie CEO Richard Syron, 64, replacing them with Herbert Allison, 65, former CEO of TIAA-Cref, and David Moffett, 56, who was a U.S. Bancorp vice chairman.

“It’s clear that there was no other choice but to do a rescue type of operation,” said Neal Soss, chief economist at Credit Suisse in New York. “In the short term, it’s constructive because it will allow for some financing and home sales that wouldn’t have happened. In the long term, it raises the question of how intimately we want the government involved in directing the use of capital.”

“Unfortunately, the second part of the dilemma remains,” said Joan McCullough, a macro strategist who studies market trends at East Shore Partners, a research firm in Hauppauge, NY said. “That is to address the U.S. consumer and his ability to overcome uncertain headwinds, such as inflationary pressures, a poor jobs picture, insufficient wages and still-oppressive costs of the necessities of life.”

Government officials and experts said it’s too early to estimate how much taxpayers will have to shoulder. That will depend on how well Fannie and Freddie perform and how much Treasury money is needed to shore up the companies.

“Just the way that this is structured, the taxpayer is going to have to pay for it,” said Alan Loewenstein, portfolio manager at American Fund Advisors in Great Neck, NY. “… How much? We’ll have to see later on.”

The impact on mortgage rates and the real estate market.

Most experts said mortgage rates should come down and banks will provide more home loans to consumers over time. But some say a long-term mortgage-rate drop is not a given. On Monday, the national average interest rate for a 30-year fixed-rate mortgage fell 0.3 percentage points to 6.04.

What this means for those who want to refinance.

For consumers who are not in default, experts say it should make it easier because banks would be more willing to lend money, knowing that Fannie Mae and Freddie Mac will continue to buy their loans on the secondary market.

When consumers and the housing markets will begin to feel the takeover’s impact.

Experts said the takeover alone is not a cure for what ails the housing and credit markets-which some analysts believe have not hit bottom. Other factors, including a weak job market and inflation, are affecting the markets as well.

The expected cost.

U.S. Treasury Secretary Henry Paulson has not said what the full cost of the takeover will be on taxpayers. However, the seizure calls for an infusion of up to $100 billion in each of the companies.

The takeovers are designed to bring Fannie Mae, formed after the Great Depression and spun off in 1968, and Freddie Mac, created in 1970, back to their original mission: to provide affordable mortgages to home buyers.

Bloomberg News contributed to this report.

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