In what is shaping up to be an erratic trading day, the Dow has dropped below 3% in early trading after the latest news that Standard & Poor's downgraded the debt of mortgage finance giants Fannie Mae and Freddie Mac.
It was widely expected that S&P's downgrade of U.S. debt would roll downhill to other entities that are closely linked to the federal government.
Fannie and Freddie, which were taken over by the government in 2008, fuel home sales by purchasing mortgages from banks.
It's not clear what - if any - effect the downgrade will have on Fannie and Freddie's borrowing costs. And since Treasury yields remain at very low levels, a sharp spike in mortgage rates seems unlikely.
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