How will mortgage bailout affect us?

Rates certainly matter in persuading people on the sidelines to step in and start shopping for a home, so any stabilization there can only help.

The overall mood in the market is also a factor, but the front-page headlines noting the government's move may not resonate with homebuyers. "I would love it if people thought that way, but they don't connect the dots like that," said Steve Heideman, president of United Mortgage Financial Group in Tempe, Ariz.

The biggest factor weighing on home prices, aside from the overall jobs picture and the state of the economy, may now be the sheer number of homes for sale, as people try to get out from under bad mortgages or their lenders put homes on the market, having already foreclosed on them.

Old loans

"The government doesn't have a great deal of interest in foreclosing on a ton of homes," said Kurt Eggert, a former member of the Federal Reserve Board's Consumer Advisory Council. As an example, he pointed to IndyMac, which was seized in July. Soon after, the Federal Deposit Insurance Corp. began offering troubled borrowers the opportunity to move into cheaper fixed-rate loans.

Could a similar move happen here? Well, both Fannie and Freddie have already provided additional financial incentives to the companies that service the loans to modify some of the troubled ones. It remains to be seen how much further they can or will go to bail out homeowners, or what sort of political pressure may be put on them to do so.

New loans

The interest rate you pay for a mortgage depends in part on the rules that Fannie and Freddie set for the kinds of loans they will buy. Now that they have new bosses in the federal government, the rules could change.

"How much authority will they have to make changes?" asked Iverson, the Denver mortgage broker. "Must they go to Congress? It's a huge unknown for consumers."

Courson, of the Mortgage Bankers Association, said in theory at least, credit-score requirements, loan-size-to-home-value ratios and down-payment requirements could come up for review.

We may not know if the loan rules will change for a few months, given the potential desire to push off some of the tough decisions until after the November elections.

Investors

While it is not yet clear whether stockholders in Fannie Mae and Freddie Mac will be wiped out entirely, Paulson did say Sunday that the entities "will no longer be managed with a strategy to maximize common shareholder returns."

The drop in their share prices thus far offers another lesson in the importance of diversification. If you invest in mutual funds, those funds may have lost a bit of money on Fannie and Freddie. But that is the whole point; it was just a bit, because most funds hold many securities.

It is now clearer than ever that there is no such thing as a truly safe single investment — not a big savings account at IndyMac, not the auction-rate securities that have caused so many problems for scores of investors and not supposed blue-chip stocks like Fannie Mae or Freddie Mac that you might buy on your own, outside of a mutual fund.

Any big, focused bets are better left for hedge funds, not for you and me.