The US Treasury Department’s plan to increase the two mortgage giants’ lines of credit and stabilize their liquidity is important to consumers looking for mortgage financing or refinancing. As long as Fannie and Freddie are able to purchase loans, banks and other mortgage lenders will be able to continue to offer mortgages to their clients  with reasonable terms and at relatively affordable rates.

According to MarketWatch, solid borrowers with good credit, reliable income, and substantial equity or down payments will be able to get loans with no problem anyway. However, Fannie Mae and Freddie Mac keep additional money in the mortgage lending pool, which allows more consumers to be able to obtain real estate financing at decent rates. This additional liquidity is needed to speed up the recovery of real estate markets in troubled parts of the country, dry up the oversupply of housing, get more first-time home buyers into the market, and allow homeowners to once again build equity in their property.

An April 13^th article from the San Francisco Chronicle stated that it will be more costly than ever to walk away from a mortgage just because the investment didn’t pan out. New guidelines bar lenders from making Fannie Mae loans to applicants who went through foreclosure within 5 years unless they can prove extenuating circumstances. And even after 5 years the borrowers will have to come up with at least 10 percent down and have gotten their credit scores back up to at least 680. Rival mortgage clearing house Freddie Mac indicated that it is going after walk-away borrowers in court to collect deficiencies (the difference between what a borrower owes and what the lender gets in a foreclosure sale). Fannie and Freddie’s actions should be far-reaching — 76% of all new mortgages are bought by the giants and must therefore meet their guidelines. These actions should be welcomed by taxpayers and homeowners alike — very few neighborhoods haven’t felt the blight of a foreclosure and the resulting hit to the adjacent property values, and making those truly responsible face their consequences should lighten the burden for everyone else.