In particular, the Anglican Communion looks like the very definition of the word "health" when compared to the US housing market.
I've explained before that the US housing market works like this. You get a mortgage at the bank. The bank may then sell the mortgage to an investor so that they can then take the cash and the profit, and loan it out again. Two government sponsored entities (GSEs), the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, are responsible for providing liquidity to the market. Americans love acronyms and cute short forms, so these two companies are known as Fannie Mae and Freddie Mac respectively.
In a liquid market, there is a sufficient volume of trading that someone can easily buy or sell. If you're in the US, the US dollar is as liquid as it gets unless there's a nuclear war and people's faith in the ability of the government to back that cash is destroyed. Liquid markets are very difficult to manipulate. Having a liquid market for mortgages makes it easier for banks to give people mortgages, and that they can offer cheaper mortgages. This makes it easier for folks to own homes.
Fannie and Freddie do slightly different things, and I've always been confused over the two.
From Morningstar, a stock rating service I trust, Fannie does this:
Fannie Mae's two main businesses are buying mortgage and mortgage securities for its own portfolio and guaranteeing payment of securities backed by conforming mortgage loans. The former is a traditional spread business, while the latter is a fee-based insurance business. Fannie only acts in the secondary mortgage market, partnering with originating lenders.
"Spread business" means that Fannie makes money off the "spread", or the difference between the buy and sell prices. IOW, Fannie might package and sell its mortgages for just over what it costs them to buy from banks. Fannie sells to investors. As mortgages are backed by real property, and the packaged (or securitized) mortgages are backed by Fannie, they are often considered safer. Fannie must borrow money in the debt markets to fund these operations.
Additionally, there are conforming loan limits. Fannie and Freddie may purchase loans for single family housing that are up to $417,000 in 2008. The amounts are indexed for inflation, and double and more family housing have higher limits. Loans above these limits won't be able to get the backing of the GSEs. They are harder to sell, and banks would have to offer higher interest rates to make these loans profitable. However, there are still investors who will buy them.
NY Times has a graphic explanation, and you can click through for a larger graphic and some more explanation.
Freddie does this:
With more than $819 billion in assets, Freddie Mac is a government-founded--but not government-insured--business that has been providing liquidity to the U.S. mortgage market since 1970. Freddie Mac purchases and securitizes residential mortgage loans and mortgage-related securities. Only a limited number of competitors offer similar services; Freddie Mac estimates that it finances one in six U.S. homes.
I'm going to be honest here. It's not clear to me how the companies are different. Either way, they both own or guarantee about $6 trillion of mortgages - half of the nation's housing market.
However, both companies may be in distress. Banks typically are highly leveraged, meaning that they take on a lot of debt. They must maintain a certain proportion of highly liquid capital (basically shareholders' equity, which is the earnings that they retain) to guard against potential losses. Fannie and Freddie, however, are exempt from federal and state tax, and had an implicit government guarantee. They essentially operated without a sufficient capital cushion. These days, an increasing number of mortgage loans are nonperforming, meaning that people are defaulting. Fannie and Freddie are guaranteeing these loans. Also, they retain some loans on their balance sheets as assets.
Investors are losing confidence, and an article in the New York Times sparked a selloff in their shares yesterday. Banks can typically raise capital by issuing stock in the markets. But if their share prices are depressed, such new stock will dilute the value of existing stock. The GSEs' share prices are depressed.
It's hard to tell how long this crisis will last. However, there's going to be a lot of worry for some time. Mortgages are likely to cost folks more. It's probably pretty rare for prayers to be offered for a for-profit corporation, but these corporations play an integral role in the housing market. Their shareholders will have to fend for themselves, but Fannie and Freddie may deserve your prayers that they survive in some form or another.
PS, I've heard of some Arab immigrants saving like heck and then plunking a whole wad of cash down for a house. Adjusting to the availability of credit is huge for a lot of immigrants, although a lot of the more frugal ones then can develop very good credit habits.
PPS, Folks thinking of maybe investing in Fannie or Freddie should take a look at this video by Morningstar. Pat Dorsey discusses investment options (he doesn't think you should try), and possible rescue scenarios (none are good for shareholders, which is why he doesn't think you should invest). However, he does contend that Fannie and Freddie are likely to survive in some form.
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