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For over a year now, crisis is wreaking havoc especially in the US economy.
Although it is showing some signs of improvement over the past few months, the economy of the US is yet to fully recover from the slump.
Even Fannie Mae, the largest mortgage finance company in the US, is doing its best to keep things under control.
The company has reported a quarterly loss of over $2 billion-and this is due to the sudden downturn of the housing market that prompts huge liabilities because borrowers failed to repay their home loans.
And as a precautionary move, they are allotting over $5.
3 billion to cover credit losses for the past few months.
Despite the move, the company is still unsure whether it can satisfy statutory capital requirements for 2009.
The US government also feels the need to get involved as a possible support package was legislated for recently.
Tension grew as experts question the stability of Fannie Mae and Freddie Mac-the main guarantors of US mortgages.
If these two companies fall, then the effects on the US economy would be devastating.
After all, these companies were founded with a goal to make loans more affordable so that the home ownership in the US will be easier.
Companies such as Fannie and Freddy-together with other smaller financial institutions-buy loans from high street lenders and package them for debt market investors.
These two companies alone combine for a whopping $5 trillion of home loans.
But this early, Fannie has cut its operating costs by 10 percent while increasing its guaranty fees.
Not only that, it is also decreasing its dividend payout to shareholders by more than 80 percent and posting stricter guidelines to protect the company from high risk loans.
And while the company's capital balance is still above the minimum level set by regulators, critical conditions would force them to have less visibility in 2009.
This year is almost over.
But the crisis is still there.
The house prices are still down.
Yes mortgage lenders and debt guarantors are still up and running-however bleak the future may be.
But for how long they can sustain their operation is the question that remains to be unanswered.
None of them, not even the government, have envisioned the extent of this crisis.
And experts believe that it will get worse and will last longer until a solution is made.
The worse part is that international financial institutions are getting involved and started to have crises of their own.
Government support will definitely be needed, but support alone will not solve the financial problems.
As long as there are borrowers who can't repay their loans, interest rates will get higher.
It would also be harder for first time borrowers to apply for a loan.
Still, analysts are hopeful that the future may not be as bleak as expected.
There are tentative signs of improvement.
Perhaps all we need to do is wait for the market to get better.
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