Tom Wolf is president of Security Home Mortgage, 910 S. George St., York, and said he has been following the financial woes of mortgage securities companies Freddie Mac and Fannie Mae.

He said that regardless of how complicated the process of buying and selling mortgages is, the result of Freddie and Fannie's troubles could affect the average homebuyer in a few ways.

To better understand his answers, here's some background with the help of George Hanzimanolis on how Freddie and Fannie are involved in the average mortgage deal.

Hanzimanolis is the legislative chairman of the Pennsylvania Association of Mortgage Brokers and president of Bankers First Mortgage in Tannersville.

When times are good . . .

· Companies such as Freddie Mac and Fannie Mae buy mortgages from banks after the banks make deals with homebuyers, then Fannie Mae and Freddie Mac package mortgages to issue on open markets to investors according to certain criteria.

· The money raised from issuing the packages comes back to banks through the process of companies like Freddie and Fannie buying more mortgages from banks. Banks use the cash to issue more mortgages to new homebuyers.

When times are not so good . . .

· Today, with a growing amount of mortgages going into default, investors on Wall Street don't want mortgage securities as much as they once did. That means Fannie and Freddie are falling on tough times.

Advertisement
· Trouble with Freddie and Fannie means banks are more leery of issuing a lot of mortgages because Freddie and Fannie aren't as likely to buy the mortgages they once did from banks.

So what does that mean in York County?

Q. Is it going to get easier or harder to get a mortgage? Why?

Wolf: In my opinion, it will make things a little more difficult. Investors drive the market, no matter what anyone says. When (Freddie and Fannie) are having problems, people are going to get worried.

Q. Why would someone want to buy someone else's mortgage from a bank?

Wolf: Basically, people say why do people sell these loans? The honest truth is the banks run out of money. They are going to sell some of (their mortgages) so they have more money to keep making loans.

Traditionally, real estate has been a pretty good investment. It's been pretty safe.

Q. Do many people realize this process is happening to mortgages?

Wolf: I don't think people realize how much investors sway the markets. It's mind-boggling. They are getting the mortgage for $200,000. That's a lot to (someone taking out a mortgage). But the people who are buying them, they might buy $1 billion of them.

If you have people jumping out of the markets who used to buy a lot of property, that's a big jolt.

Q. Is this going to do anything to interest rates on mortgages?

Wolf: For instance, on Friday, when all this bad news came out - Freddie and Fannie - the interest rates (on mortgages) changed four times. It's a big effect.

(Interest rates) started the day pretty nice and probably went up a quarter of a percent by the end of the day.

But, by and large, interest rates are still pretty good.