Fannie Mae and Freddie Mac; are you going to raise the rates?

Friday July 11th brought turmoil in the mortgage business yet again.
Sparked by the takeover of Indymac Bank, who had made too many the B+C loans resulting in numerous defaults caused by lending people money who probably had no right to be borrowers in the first place finally came full circle and caused the meltdown in Pasadena.
Then of course the question arose about the two largest corporations authorized by congress to securitize mortgages and sell them as mortgage backed securities to pension funds, investors, hedge funds, and anyone else who wanted to invest capital into a somewhat safe haven. I say "safe" because over the years these two organizations have dealt in AA paper that is, the most conservative underwriting guidelines, only lending to the best credit, most stable income and at lower loan to values. It seems that Fannie Mae and Freddie Mac relaxed their standards in the go-go years of 2004-2005 and now they are having liquidity problems, too.
The issue is one of trust.
When even the most conservative organization is having problems, which investor will believe the system is still going to work in the future? The other problem is one of size, and these two companies are directly responsible for half the US home loan market, totaling 5 trillion dollars.
The bond market is the bedrock upon which mortgages are based, likes a stable environment. When there is sudden change in the status quo investors pull their money out which causes the price of bonds to go down, which in turn makes yields go up. Mortgage loan prices are based on bond yield, so mortgage rates tend to climb.
And climb they did. There were three increases on Friday afternoon. Today the market reacted somewhat favorably to Treasury Secretary Henry Paulson's remarks that the US Government will step in to mop up or prop up if need be.

What is the bottom line? Rates are expected to move from where they are. Nobody can tell you where they will end up or how soon they will change, but one thing is 100% sure:
a broker can only tell you what rate you can have now, and how long you can lock it in. If it sounds good to you, take it. These are changing times, I would hate to see a client get hurt with a rate swing if they didn't understand a rate lock.