CNN's has run headlines including meltdown, bailout, and collapse again.  That's just this past week and that was just including searches on "Fannie Mae."

In the past few days, we've seen Fannie Mae, Freddie Mac, and regional bank concerns dominate headlines.

Here's a quick, simple Q&A regarding this weekend's news:

Q: What are Fannie Mae and Freddie Mac and what do they do?

A:  Both are Goverment Sponsored Enterprises created by Congress, then somewhat privatized.  Freddie Mac was created to compete with Fannie Mae.  Fannie Mae dates back to the Depression.  They guarantee roughly $5.2 trillion of $11 trillion in outstanding mortgages.  By buying, pooling, and insuring mortgages, they create more money for banks to lend in new mortgages.

Q: What does the IndyMac crisis have to do with Fannie Mae and Freddie Mac?

A: Nothing.  IndyMac faces a similar problem to Fannie/Freddie in that they core crisis is a drop in home prices and defaults on loans.  IndyMac is a regional bank and had a massive run on cash ($1.3 billion) and was getting crushed from both sides.

Q: Did Congress just save the housing market?

A: No, although the steps that they are taking will stabilize the housing industry.  We are talking about entities that insure over $5 trillion in loans.  This will not be an overnight fix, but it should have a stabilizing effect.

Q: Do I need to make a run on the banks and catch a Chaplin film this afternoon?

A: Probably not.  An equally large insurer, the Federal Deposit Insurance Corp., guarantees traditional bank accounts up to $100,000 and individual retirement accounts up to $250,000.

Money beyond those limits in one institution is likely an unnecessary risk. The Chaplin film would be  discretionary, but this is not a Depression-style banking collapse.

Q: How are the government's moves to help Fannie Mae and Freddie Mac going to affect mortgages, loans and the federal budget deficit?

A: That's actually three questions.  It will not affect your mortgage.  If you make timely payments, there is no provision to "call" your mortgage.  It will affect mortgages and you'll see those in our Daily Updates section.  The moves to shore up Fannie Mae and Freddie Mac are essentially an explicit guarantee.  With the weight of the US Government behind them, it will push down rates now that mortgages are less risky.  The federal budget deficit is a mess.  That predates this new, additional mess.  It is currently unclear how much of an impact this will ultimately have on the taxpayer and/or the Dollar.

Q:  Are all the cool kids defaulting?

A:  Only 1.2% of them.  The Fannie Mae and Freddie Mac portfolios are not at all like the sub-prime mortgages we've been concerned about.

Q:  How will Fannie and Freddie change their fees?

A:  The last time that Fannie and Freddie faced a significant problem, they came up with additional delivery fees.  These most specifically hit those with higher credit risk.  Our Credit Center is a great resource and we have a posted webcast on these Loan Level Price Adjustments.