Expand homeownership or achieve returns for the shareholders? That was the balancing act that ultimately toppled government housing firms Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). The order of priority is now clear: The companies’ new conservator has announced measures to alleviate the terms of existing mortgages in order to avoid home foreclosures.

What of the taxpayer-shareholders?
The trouble is, those measures could end up costing the new shareholders -- and under the new financial order, that’s the U.S. taxpayer.

The bright side is that taking steps to avoid foreclosure can be a rational economic course of action, if private-sector banks (is there any such thing anymore?) are any example. Homes that are in foreclosure lose value more quickly than those that remain inhabited, for example.

JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Citigroup (NYSE:C) have already announced programs to reduce the number of foreclosures. Expect the remaining large lenders, such as Wells Fargo (NYSE:WFC), to follow suit (Wachovia (NYSE:WB) had already initiated a program before being acquired by Wells) -- the government will “encourage” them to take that path.

Things aren’t getting simpler for bank investors
A financial crisis typically creates superb investing opportunities among financial stocks. However, a fluid regulatory environment and the extent of government intervention require that investors be extra cautious when navigating waters that have become increasingly murky.

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