Secondary Market Rift Could CauseMortgage Rate Shift

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LAS VEGAS - (12/12/05) -- Credit unions were warned by oneanalyst that mortgage rates over the next three years could tipsharply upward should problems develop in the secondary market. TimLerew, who heads up an Elizabeth, Colo.-based financial institutionconsultancy and who is well known to many within credit unions,said that by year-end 2008 all financial institutions may bestruggling to recover from a crisis at Fannie Mae and Freddie Macthat triggers 30-year fixed mortgage rates above 9%. The resultwill be that credit unions must have a strong home equity productin place, Lerew told board members at the CUES Directors Conferencehere. Lerew said he is also worried over one other potentialcrisis, that terrorists will seek to bring down the U.S. financialsystem by hitting "soft target" branches with attacks, even bydoing things as simple as leaving envelopes filled withpowder.

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