It is expected that the Federal Government will assume control of Fannie Mae and Freddie Mac in the short term.  Though this measure is certainly drastic, it is expected to be short lived in the form of a conservatorship, meaning after being overhauled they will both be returned to private control.  This move is expected to stabilize the secondary mortgage market; uncertainty in the markets around Fannie Mae and Freddie Mac should subside, making it easier for the companies to get access to funding at cheaper rates. That, in turn, could have a spillover effect in the overall market for mortgages, lowering interest rates and helping the battered housing market recover.

Looks like the markets and mortgage backed securities will remain in flux in the immediate future until an agreement can be reached on the proposed $700 billion bail-out.  Next week should make for a very interesting time in the financial industry and the economy as a whole.  Stay tuned!