Builders across the country offered a tentative thumbs-up to the U.S. government’s plan to take over the mortgage finance giants Fannie Mae and Freddie Mac. They expressed cautious optimism that the plan would create stability and remove uncertainty from jittery and battered financial markets, which could have a positive impact on mortgage interest rates and consumer confidence.

“Capital markets are already responding,” said Tim Eller, CEO of Dallas-based Centex, during an interview Monday. Eller thinks the bailout of Fannie and Freddie shows that “the government believes housing is an important part of the [economy’s] recovery.”

But builders don’t necessarily see the bailout as a panacea for what ails the housing industry, which continues to be plagued by multiple ills of excess inventory, reluctant buyers, and tighter borrowing requirements. Therefore, builders aren’t ready yet to predict how this plan would affect home buying over the long term. “I don’t think [the bailout] will be a negative, but I’m not sure it’s going to be a positive, either,” says Tom Krobot, CEO for Ashton Woods Homes in Roswell, Ga. “Fannie Mae and Freddie Mac are vital to the health of the building industry, but the plan is still unfolding.”

In the short term, builders see mostly good things coming out of the government’s intervention. “The move is a big deal for the housing recovery,” says Doug Bauer, president and COO of William Lyon Homes of Newport Beach, Calif., who expects the bailout to have far greater impact than the housing bill Congress recently passed. Kenneth Malm, president of Craftmark Group in McLean, Va., adds that by moving Fannie and Freddie into a government-controlled conservatorship, each can now focus on its primary mission—mortgage liquidity—and worry less about scrambling to maintain its capital requirements. Bill Clark, CEO of Bill Clark Homes in Greenville, N.C., is hoping the bailout will quell financial markets “that are as nervous as I’ve ever seen them.”

Steve Mungo, CEO of Mungo Cos. in Irmo, S.C., speaks for many builders when he states that his “overwhelming concern” about the execution of the government’s plan is that it ultimately provides “mortgage mechanisms for people to be able to buy homes.” Mungo and other builders sound like they’d be thankful if the bailout simply creates an environment that helps lower interest rates for home mortgages. “That’s the single most relevant issue for us,” says Mungo. (Krobot notes that the spread between the interest rates for 10-year Treasury bills and 30-year fixed mortgages, which historically is around 100 basis points, is now between 250 and 260 basis points.)

However, some builders question whether the government stepped a bit too forcefully into the breach in its actions to take over the two companies. “From what I’ve read so far, Fannie Mae was not about to fail and if left alone would have survived,” observes Michael Brodsky, CEO of Hamlet Homes in Salt Lake City. Malm says he normally opposes government’s involvement in the private sector. But in this case, he’s willing to make an exception because Fannie and Freddie “were not really private businesses to start with.” And Alan Shapiro, president of Bethesda, Md.-based Winchester Homes, is like many builders who feel the situation in the financial markets had deteriorated to the point where the government had to do something. “We can ill-afford to have an illiquid mortgage market right now,” he says.

Shapiro sees the bailout and takeover of Fannie and Freddie as “a good step to keep us on the path for recovery.” But it’s not a silver bullet, he cautions. “It’ll be—if nothing else—something that keeps us neutral. The fundamental problems are still there; inventory still needs to come down.” Eller doesn’t think this bailout will alleviate the problems that builders are having borrowing money from their banks. And Brodsky isn’t sure whether recapitalizing Fannie and Freddie is enough to assuage the “palpable fear” he sensed from other builders at a recent Builder 20 meeting about their ability to survive until the market turns around.

Whether the bailout of Fannie and Freddie helps trigger that housing turnaround remains to be seen, and few builders will hazard guesses about the long-term future. “If you put Paulson and Bernanke in the same room, I bet both of them would shrug” if asked what the final outcome will be, quips Krobot, referring to Treasury Secretary Henry Paulson, the architect of the government’s bailout; and Federal Reserve chairman Ben Bernanke.

But builders also ask what happens if this plan doesn’t produce its intended effect on financial markets and the economy? “The government is running out of ammunition,“ says Mungo, who notes that his company saw little interest among first-time home buyers in using the $7,500 tax credit available to them to stimulate purchases. Malm, though, says the country has few other viable chess moves left. “The government, if it’s competent, has no other choice but to make sure this endgame works.”

Alison Rice, Nigel Maynard, and Teresa Burney contributed reporting to this article.

Learn more about markets featured in this article: Salt Lake City, UT.