Article Source How did we get into this mess, and how do we get out of it? First, a little background: Both Freddie and Fannie were initially created by the U.S. Congress with the goal of expanding the residential mortgage market. They are for this reason referred to as "government-sponsored enterprises", or GSEs, even though both eventually were converted into private companies for which there is today no explicit government guarantee of their debt.... After a homeowner has borrowed money to buy a home, the original lender likely resold that loan to Fannie or Freddie. The GSE in turn collected some of those mortgages in a pool which was sold in the form of mortgage-backed securities (MBS) to private investors, for which the GSEs collect a fee in exchange for guaranteeing payment on the MBS. Other mortgages purchased by the GSE are held directly by the GSE for its own investment ...

The UK housing sector, already best by plunging demand and prices, has been hit with a potential body blow which could tip the economy into a deep recession. Taylor Wimpey, the country’s biggest home owner, has shocked the UK market and observers with the news that it has failed to agree a deal with potential new investors, forcing the stricken house builder to admit on Wednesday that it could breach banking covenants if the housing market does not recover. Coming with the news of poor sales figures for big retailer, Marks & Spencer, the Taylor Wimpey news will undermine investor confidence across the board. The company had been looking for around 500 million pounds ($A1 billion) in new capital from existing big and new shareholders, and had promised to write down the value of its land bank in Britain, Spain and other countries by around 660 million pounds (around $A1.4 billion). The write-down ...