What does all of this mean?

Despite last week's failure of the IndymacBank, Federal Deposit Insurance Corp (FDIC) Chairman Sheila Bair said on Monday, "the overwhelming majority" of U.S. banks are "safe and sound." What this means to the general public is that savings only up to $100.000 is insured against bank failure per account.  It would be prudent to place any excess into an account with another bank or finanicial institution. There have been hints in the media that more banks might fail over the next three years, due to credit losses and tight capital markets.

Regarding Freddy and Fannie...Fannie Mae is short for Federal National Mortgage Association and Freddie Mac is short for Federal Home Loan Mortgage Corporation. Both are shareholder-owned companies mandated by the US Congress to provide funding to the U.S. housing market.  If they were to collapse, mortgages would be harder to get and much more expensive.  US Treasury Secretary Henry Paulson said the government's primary focus is in supporting Fannie Mae and Freddie Mac in their current form. 

Peter Kedzior , a Chicago REALTOR and fellow Blogger on ActiveRain, helps to put this all into perspective in his posting, Fannie and Freddy Scare.

Down payments are equalized across the country

Fannie Mae today announced a new, national policy on down payment requirements for conventional, conforming mortgages the company will purchase or guarantee.  A conventional mortgage is one which the interest rate does not change during the entire term of the loan.  A conforming loan is one which meets the standards of the lender.  

Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional and conforming mortgages processed through its Desktop Underwriter^® automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of Desktop Underwriter, in all geographic locations in the United States.

The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining. 

The stimulus package passed and signed by the President in February raises the conforming loan limit to $729,750 through 2008 from $417,000.  Read more about this.