Freddie and Fannie headed into foreclosure?

[30ashopper]

The New York Times finally picked up the story -

The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.

Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee ? which could be staggering ? would be paid by taxpayers.

The government officials said that the administration had also considered calling for legislation that would offer an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies. But that is a far less attractive option, they said, because it would effectively double the size of the public debt.

The officials also said that such a step would be ineffective because the markets already widely accept that the government stands behind the companies.

http://www.nytimes.com/2008/07/11/business/11fannie.html

--> We're all real estate investulators now!

 

[Mango]

"The more traditonal routes" didn't bump up their commission as much as the ARMs (with an extra dollop of YSP for pre-pay penalties)....that's why. Glad to hear you banged out before it was too late--hope you took your business elsewhere and didn't pay the sleeze (a second time) for your refi.

The good news is when all the dust of this crash settles...all homebuyers going forward should be educated to the point of being able to write their own mortgages.


.

A) Traditional ARM's did not pay anything more than a traditional fixed. Most states have prepay penalty laws pertaining to ARMS. Matter of fact, New York and CT did not even offer a prepayment penalty discount on traditional loans.

B) You have very high hopes.
I do hope they will be funding them too.
Gotta love ya Shelly.

The New York Times finally picked up the story -



http://www.nytimes.com/2008/07/11/business/11fannie.html

--> We're all real estate investulators now!

What made you think that we, the taxpayer were not going to somehow, someway not pay for this mess in some shape or form?

 

[GoodWitch58]

I think we can blame Sen. Phil Gramm for part of it..but, then I guess we would just be whining...

 

[30ashopper]

What made you think that we, the taxpayer were not going to somehow, someway not pay for this mess in some shape or form?

I get a couple hundred million for a foreclosure relief bill. But this? We're talking trillions, 50% of the home lending market kind of bail out. I just can't believe the politicians would dump that kind of debt on all of us. I can't even begin to wrap my head around the repercussions of a failure in these two institutions.

 

[elgordoboy]

I get a couple hundred million for a foreclosure relief bill. But this? We're talking trillions, 50% of the home lending market kind of bail out. I just can't believe the politicians would dump that kind of debt on all of us. I can't even begin to wrap my head around the repercussions of a failure in these two institutions.

Trillions? All their loans are bad?!?

 

[SHELLY]

A) Traditional ARM's did not pay anything more than a traditional fixed. Most states have prepay penalty laws pertaining to ARMS. Matter of fact, New York and CT did not even offer a prepayment penalty discount on traditional loans.

(1) You can't deny that "one or two" mortgage folks (not you of course) would "steer" clients to loan products that offered them fatter YSPs--most of the time that would mean an ARM from the likes of Countrywide vs traditional fixed.

(2) Prepay penalty was alive and well in Florida, and they did fatten YSP for the broker who could push it on his clients.


.

 

[30ashopper]

Trillions? All their loans are bad?!?

Trillions of debt, actual losses I guess aren't exactly known. Hundreds of billions of dollars? Plus the added shock of all the equity the private sector holds which would vanish -

Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee ? which could be staggering ? would be paid by taxpayers.

The government officials said that the administration had also considered calling for legislation that would offer an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies. But that is a far less attractive option, they said, because it would effectively double the size of the public debt.

 

[SHELLY]

Trillions? All their loans are bad?!?

No, so far only about 1% or $50 Billion are in trouble (so far)...but if the $5.2 Trillion is added to our $9.5 Trillion national debt that would make our nation's Debt-to-Income ratio soar and just might increase our cost of borrowing down the road.

.

 

[30ashopper]

For an interesting take, Jim Cramer and Paulsen on cnbc -
http://www.cnbc.com//id/25643573

 

[Bob]

one percent