Fannie and Freddie: The Legacy of Washington’s Financial Illiterates
Posted by Larry Doyle on June 14th, 2010 8:54 AM |
When the day of reckoning comes, the record will show that those misguided, incompetent and reckless legislators who supported and were supported by the house of cards known as Fannie Mae and Freddie Mac will have cost our nation untold hundreds of billions of dollars. In fact, the losses attributed to these organizations may ultimately cross the trillion dollar threshold. Think about that for a second.
While Franklin Raines, Leland Brendsel, Daniel Mudd, and other Fannie and Freddie execs walked out the door with tens of millions of dollars, our nation is left with a financial sinkhole that will serve as a drag on our economy for years if not generations. How and why did this happen? (more…)
Tags: composition of Fannie and Freddie portfolio, crony capitalism, Daniel Mudd, Edward Pinto, Fannie-Freddie Fix at $160 Billion with $1 Trillion Worst Case, Franklin Raines, future of Fannie and Freddie, future of housing, Housing Crisis, housing finance, Leland Brendsel, losses at Fannie and Freddie, Mark Hanson, Mortgage Crisis, mortgage defaults, mortgage delinquencies, mortgage foreclosures, mother of all bailouts, size of losses at Fannie and Freddie, socialized housing, Washington's financial illiterates
Posted in Fannie Mae, Freddie Mac, General | 4 Comments »
Socialized Housing Manifesto
Posted by Larry Doyle on March 26th, 2010 10:36 AM |
Thank you to our friends at 12th Street Capital for sharing a sneak peek of Uncle Sam’s release of his new “Socialized Housing Manifesto.” (Click on the image to access pdf document.)
What is the one word that Uncle Sam is clearly trying to emphasize throughout the 4-page release? Responsible. Who the hell is Uncle Sam to define who and what is responsible or not? (more…)
Tags: condoning mortgage fraud, Housing manifesto, Housing plan march 26 2010, HUD Housing Plan March 26 2010, mortgage plan March 26 2010, mortgage principal reduced, mortgage reductions, Obama's Housing manifesto, Obama's redistribution plan, redistribution, socialized housing, socialized housing finance, Socialized Housing Manifesto
Posted in General, Housing Crisis, Moral Hazard, Mortgage Cram-Down, Mortgage Crisis | 8 Comments »
Fannie and Freddie’s Blank Check Will Further Fuel America’s Rage
Posted by Larry Doyle on December 28th, 2009 8:38 AM |
I remain incensed at the sheer arrogance and brazen demeanor of the Obama administration providing a blank check on Christmas Eve to cover future losses of the failed institutions Fannie Mae and Freddie Mac. Given the fact that this check has been issued, America deserves to know what exactly it is covering. Over and above a full and total exposition of these government sponsored entities, America is in a position to demand certain retributions. Let’s bang the drum and demand some answers, including:
1. The current valuations of all of Freddie’s and Fannie’s holdings so America can fully evaluate those holdings relative to market prices.
2. The current fees being paid for all services rendered.
3. An independent audit.
4. Why aren’t these stocks delisted immediately? To allow stock in these entities to continue to trade is a total mockery of a legitimate market.
5. Clawback all bonus payments rendered to Franklin Raines, James Johnson, and Leland Brendsel, the executives at Fannie and Freddie who truly plundered these institutions. (more…)
Tags: delist fannie and freddie, fannie and freddie stock, Fannie and freddie's blank check, Fannie and freddie's contingency liabilities to Wall Street, Fannie and freddie's portfolio holdings, Fannie Mae, Fannie Mae and freddie Mac future, Franklin Raines, Freddie Mac, hat is fueling america's rage, James johnson, Leland Brendsel, socialized housing, w
Posted in Fannie Mae, Freddie Mac, General | 8 Comments »
Fannie and Freddie’s Huge Christmas Bonus
Posted by Larry Doyle on December 26th, 2009 11:14 AM |
While Americans across the country hustled and bustled for last minute gifts and holiday preparations, our wizards in Washington tied a big red ribbon on a blank check made out to Freddie Mac and Fannie Mae. In the process, a future of socialized housing finance has been increasingly solidified.
Why would the Obama administration pass this blank check under the cover of darkness on December 24th? In hopes that America had just settled down for its long winter’s nap and would miss this act of pillage and plunder. The Wall Street Journal highlights this ‘blank check’ in writing, U.S. Move to Cover Fannie, Freddie Losses Stirs Controversy:
The Obama administration’s decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.
The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each. (more…)
Tags: bailout funds for Fannie and Freddie, Barack Obama, blank check for Fannie and Freddie al, Chris Dodd, Fannie Mae, fannie's future, Freddie Mac, freddie's future, freddie's outlook, future for freddie mac and fannie mae, homeowner defaults and foreclosures, housing finance, housing losses, John Kerry, losses at Fannie and Freddie, Mortgage Crisis, socialized housing, Treasury gives blank check to Fannie and Freddie, U.S. Moves to Cover Fannie Freddie Losses Stirs Controversy
Posted in General | 3 Comments »
Obama Socialized Housing Policy: If At First You Don’t Succeed . . . Try, Try, Again
Posted by Larry Doyle on November 30th, 2009 4:13 PM |
The fact that the Obama administration is reticent to release data pertaining to completed mortgage modifications speaks volumes as to the lack of success of this initiative. With almost a third of American homeowners now ‘underwater’ on their mortgages, Obama and team are sticking to their game plan to modify mortgages. Details of Obama’s revised game plan can be accessed at MakingHomeAffordable.gov:
The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) today kick off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration’s Home Affordable Modification Program (HAMP) convert to permanent modifications. The modification program, which has helped over 650,000 borrowers, is part of the Administration’s broader commitment to stabilize housing markets and to provide relief to struggling homeowners and is a primary focus of financial stability efforts moving forward. Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year.
375,000? I will take the under on that. Why? As I highlighted on October 29th in my commentary “Mortgage Modifications: Statistically Insignificant”, up to that point a whopping 1,080 mortgages had been successfully and permanently modified. Policy makers believe 374,000 mortgages will be successfully and permanently modified in the last ten weeks of the year. Who’s zooming who? Would they like to place a wager on that? I’ll give odds. (more…)
Tags: HAMP, makinghomeaffordable.gov, modifying mortgages, mortgage cramdowns, mortgage modification process, mortgage servicer accountability, mortgage servicers, Obama housing policy, servicer accountability, Servicer Participation Agreement, shaming mortgage servicers, socialized housing, successful mortgage modifications, trial modifications, trial mortgage modifications
Posted in General, Housing Crisis, Moral Hazard, Mortgage Cram-Down, Mortgage Crisis, Mortgages | 6 Comments »
Is Housing Tax Credit Coming to an End?
Posted by Larry Doyle on October 26th, 2009 2:02 PM |
Is the clock about to strike midnight for the Federal tax credit to support housing?
Uncle Sam has implemented a wide array of programs to support the domestic housing market. These programs include:
1. Mortgage modifications.
2. Massive funding support for Freddie Mac, Fannie Mae, and the Federal Housing Administration.
3. Increasing the loan limits on mortgages eligible for purchase by Freddie and Fannie in certain regions of the country.
4. Capital injections into a number of large banks and mortgage originators via the TARP.
5. An $8k tax credit for new home purchases.
Of all of these programs, most analysts believe the tax credit has had the largest positive impact. Why has that happened? In my opinion, the tax credit directly impacts the buyer while the other programs are an attempt to support housing but are as much or more supportive of the financial organizations than the homebuyers. (more…)
Tags: Freddie Fannie FHA, Housing Credit Will Likely Be Phased Out, housing tax credit, International Strategy and Investment, ISI, ISI Says, loan limits on mortgage purchases, mortgage modifications, socialized housing, TARP
Posted in General, Home Loan, Housing Crisis | 4 Comments »
Housing’s Catch-22
Posted by Larry Doyle on October 12th, 2009 9:28 AM |
What is the optimal policy to deal with our ongoing housing crisis? Should Uncle Sam continue to throw more money at mortgage modifications? Should banks be compelled to implement a principal reduction program? Should Uncle Sam step in and subsidize the principal writedown involved in a principal reduction program? Would that be the mother of all socialized housing programs? Let’s navigate and address these topics knowing full well that none of these questions have any easy answers.
I witness further evidence again this morning of a continued increase in home foreclosures amidst the prime mortgage space. The Wall Street Journal highlights this ongoing development in writing, Foreclosures Grow in Housing Market’s Top Tiers:
The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. “The slope of that curve in recent months is much sharper than it was recently,” said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.
Foreclosures are rising in more expensive markets as home values in those areas fall, leaving more homeowners with mortgages that exceed the value of their properties. Prime loans accounted for 58% of foreclosure starts in the second quarter, up from 44% last year, according to the Mortgage Bankers Association. Subprime mortgages accounted for one-third of foreclosure starts, down from one-half last year.
The prime category includes so-called exotic mortgages that were increasingly used to buy more expensive homes, including interest-only mortgages that allowed borrowers to defer principal payments during an initial period. Borrowers often aren’t able to refinance out of these products because the drop in home values has left them with little equity in their homes.
Default rates are particularly high and expected to rise on option adjustable-rate mortgages, which allow borrowers to make minimum payments that may not cover the interest due. Monthly payments can increase to sharply higher levels after five years or when the outstanding balance reaches a certain level. A study by Fitch Ratings found that 46% of option ARMs were 30 days past due last month, even though just 12% of such loans have reset to higher monthly payments.
Zillow estimated that nearly one in four homes with mortgages was worth less than the value of the property at the end of June. Mr. Humphries said he didn’t expect to see foreclosure volumes level off until later in 2010. (LD’s emphasis)
With the waves of foreclosures not abating, Uncle Sam’s plans to merely modify mortgages is proving largely insignificant in supporting the overall housing market. Homeowners are clearly showing a strong inclination to default on their mortgages when they are ‘underwater.’ Thus, how does Uncle Sam help people get ‘above water?’ Compel banks to reduce the principal balance of the mortgage. Will they do it? Not quickly, as a principal reduction would imply an immediate hit to the banks’ capital. (more…)
Tags: foreclosures, Foreclosures Grow In Housing Market's Top Tiers, foreclosures of prime loans increasing, home foreclosures, housing, Housing Crisis, interest only mortgages, Mortgage Bankers Association, Mortgage Crisis, mortgage defaults, mortgage modification, option adjustable rate mortgages, option ARMS, principal reduction, principal writedown, rising foreclosures, socialized housing, Stan Humphries of Zillow, Swedbank, Swedbank Hits Out at Latvia's Mortgage Plan, Thomas Backteman of Swedbank
Posted in Banking Institutions, General, Home Loan, Housing Crisis, Mortgage Cram-Down, Mortgage Crisis, Mortgages | 1 Comment »
Uncle Sam’s Dirty Little Secret Is Revealed
Posted by Larry Doyle on July 23rd, 2009 11:15 AM |
Uncle Sam may think he can keep losses of tens of billions of dollars somewhat secretive, but when those losses cross into the hundreds of billions the dirt is much harder to keep under the rug.
What is the nature and size of this dirt? The losses assocated with those dastardly large twins, Fannie and Freddie. I lifted the rug on this dirt on June 18th in writing, Uncle Sam’s Dirty Little Secret.
CNN reports today, Fannie and Freddie: The Most Expensive Bailout
The fact remains that these two wards of the state are no longer for profit entities but rather vehicles for promoting Obama’s housing plans and redistribution of wealth.
The losses within Fannie and Freddie will accrue as long as housing delinquencies and defaults increase. No credible analyst can truly predict when those statistics may peak. They can guess but given the runup in home prices along with the growth in housing, that is all they can do.
In fact, the argument can be made that the very policies being utilized to forestall delinquencies and defaults will ultimately exacerbate and extend the pressure on the housing market, and in turn, Fannie’s and Freddie’s losses.
Will the American taxpayer ever see a return on the funds being pumped into Fannie and Freddie? Don’t hold your breath.
CNN continues,
Let’s be honest, Fannie and Freddie have become financial intermediaries used to promote a form of socialized housing.
With Uncle Sam’s dirty little secret now revealed, break out the industrial strength vacuums!
LD
Related Commentary
Freddie Mac, Fannie Mae Deja Vu? ; May 28, 2009
If you think Fannie and Freddie are alone amidst this dirt, they have sizable company in the form of the Federal Home Loan Bank system.
Tags: bailout of Fannie Mae and Freddie Mac, Bose George analyst at KBW comments on Fannie and Freddie, CNN report Fannie and Freddie: The Most Expensive Bailout, director of Federal Housing Finance Agency, Fannie and freddie are no longer for profit companies, Fannie Mae Freddie Mac and FHLBs losses, future of Fannie Mae and Freddie Mac, housing, how large are losses at Fannie Mae and Freddie Mac, how much more money will fannie and Freddie need?, how will Fannie Mae and Freddie Mac be managed in the future, JAmes Lockhart, James Lockhart comments on Fannie and Freddie, losses within Fannie Mae and Freddie Mac, socialized housing, what is going on at Fannie Mae and Freddie Mac, will taxpayer make money on Fannie and Freddie investments
Posted in Fannie Mae, Federal Home Loan Banks, Freddie Mac, General, Housing Crisis | 2 Comments »