Why does Fannie Mae have to be bankrupt? Since most homes are insured, the insurance will pay the nominal owners enough so that they will be able to pay off their mortgages.
Jordan | 09.03.05 - 8:25 am | #

I had that reaction, too, but I wonder how many of the homeownerss in New Orleans had flood insurance.

I realize that [nearly?] every mortgage company requires borrowers to have fire (and wind?) insurance, but I don't know whether they require flood insurance as well.
The Eclectic Econoclast | Homepage | 09.03.05 - 8:31 am | #

According to one news report, less than half of New Orleans homeowners had flood insurance. I would expect that a Fannie Mae loan would have required them to have it though. (It's required everywhere else in the country if you live in a flood plain.)

Fannie Mae has already started making allowance to delay or suspend mortgage payments for those affected up to 18 months and to create longer payback loans. Obviously this costs Fannie money, but it will keep the delinquency rates looking normal. FDIC has already told lenders (many of whom hold Fannie Mae securities on loans they originated) that they have leeway to make "prudent efforts to adjust or alter terms."
Tom Hanna | Homepage | 09.03.05 - 3:50 pm | #

Fannie Mae has a line of credit with the Treasury. That's why it's called a "government-sponsored entity." Bankruptcy simply won't happen.
KipEsquire | Homepage | 09.03.05 - 9:29 pm | #