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peter
4547 Posts |
 Posted - 09/06/2008 : 11:56:33 PM
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http://www.bloomberg.com/apps/news?pid=20601087&sid=aMX336c2lWGQ&refer=home
Paulson is likely to take over and place Fannie Mae and Freddie Mac into
a conservatorship with the coming announcement.
What will be the repercussions on the mortgage market?
Peter |
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propertylender.c
1276 Posts |
Posted - 09/07/2008 : 08:40:12 AM
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| Definately not good. |
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CoolMtgGuy
3663 Posts |
Posted - 09/07/2008 : 08:58:54 AM
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| Anyone surprised about this step? |
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crankyusi
658 Posts |
Posted - 09/07/2008 : 09:02:41 AM
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| One economics professor from UC Berkeley is saying should be minimal impact as the market has anticipated this for awhile. |
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SoCalRay
2698 Posts |
Posted - 09/07/2008 : 09:02:54 AM
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no
But I will be online when the overseas markets open
right about the time the Colts and Bears kickoff |
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SoCalRay
2698 Posts |
Posted - 09/07/2008 : 09:09:41 AM
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This is the interesting part of it
Unanswered questions
The cost of the government intervention remains unclear. Experts argue that it will depend in large part on the structure of the rescue, the direction of home prices and mortgage default rates. Still it seems almost certain it will run into the billions and will most likely eclipse such other high-profile government bailouts including than the Federal Reserve's $29 billion backing of Bear Stearns assets when it was taken over by J.P. Morgan Chase.
Another unintended yet unavoidable consequence may be the impact to the nation's banks.
Some of the nation's largest financial institutions including JPMorgan Chase (JPM, Fortune 500) and Sovereign Bancorp (SOV, Fortune 500) own a big chunk of the estimated $36 billion in preferred shares of Fannie and Freddie, which are at risk of being wiped out should Fannie and Freddie do end up getting a cash infusion from the Treasury Department.
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VVance
2486 Posts |
Posted - 09/07/2008 : 09:24:11 AM
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quote:
Originally posted by SoCalRay
This is the interesting part of it
Unanswered questions
The cost of the government intervention remains unclear. Experts argue that it will depend in large part on the structure of the rescue, the direction of home prices and mortgage default rates. Still it seems almost certain it will run into the billions and will most likely eclipse such other high-profile government bailouts including than the Federal Reserve's $29 billion backing of Bear Stearns assets when it was taken over by J.P. Morgan Chase.
Another unintended yet unavoidable consequence may be the impact to the nation's banks.
Some of the nation's largest financial institutions including JPMorgan Chase (JPM, Fortune 500) and Sovereign Bancorp (SOV, Fortune 500) own a big chunk of the estimated $36 billion in preferred shares of Fannie and Freddie, which are at risk of being wiped out should Fannie and Freddie do end up getting a cash infusion from the Treasury Department.
The big financials will be taken care of. The preferred stock holders will ne unaffected. The common shareholders are another story.
This action, although not unexpected, means that almost every conventional mortgage in this country is now controlled by the Federal Government. |
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Bob H
300 Posts |
Posted - 09/07/2008 : 09:26:51 AM
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What is a better alternative? The agencies were not going to survive and retain minimum capitalization. The Fed indentified accounting practices that inflated their balance sheets. Their reported capital reserves were already borderline. With future losses looking certain, what choice was there?
If the agencies failed, who is going to fund loans? All of the big mortgage companies have reduced their product lines to saleable only. Mortgage companies do not want to portfolio anything until their balance sheets start to recover. If the agencies failed, conforming loans would stop being offered. That would be the final nail in the coffin for our already devastated real estate market.
The American economy cannot recover until our housing market stabilizes. Nothing over the last 12 months has even remotely resembled a stablilizing housing market or liquiditiy returning to the mortgage banking industry. The Fed stepping in isn't good or bad....it is necessary. It is what it is and we will have to make the best of it.
The article on bloomberg.com has some excellent insight. The Fed is planning on buying MBS's in the open market. Can anyone say spreads tightening? MBS's will certainley benefit from this action. Read the interview with PIMCO's Bill Gross. After the news settles in and investors have time to analyze what this all meas, we should see consistently lower rates. Confidence is the MBS market will jump over the next couple of weeks.
5.5% on a 30 year fixed would have a strong psychological impact on the housing market. Everyone knows this and it will never happen without taking some of the fear out the secondary market. In a traditional market we would be there right now. |
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peter
4547 Posts |
Posted - 09/07/2008 : 6:31:19 PM
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Paul and Bob, excellent analyses and insights.
I also read that Bill Gross of Pimco said that Pimco will buy
more into Fannie and Freddie. This means that they see the
future in a positive light, and if the government starts
buying and supporting the MBS market then we should see rates
stabilizing to 5.50 to 6.00% which will trigger more refinances.
But in the short term, we will probably house cleaning
and retrofitting the accounting systems to the detriment of
the mortgage market for a while. Guidelines might even be
tightened further and until the new accounting systems are
in place the reduced volume of buying by Fannie and Freddie
will likely hurt the banks and the lenders for a while.
Peter |
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MisterVA
6570 Posts |
Posted - 09/07/2008 : 6:33:02 PM
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| Colonel Mustard in the Conservatory with the Knife. |
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KSCOTTMIDACAP
101 Posts |
Posted - 09/07/2008 : 9:12:37 PM
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| I believe this will be a positive thing for the market just by renewing confidence. We have talked about this much and i do not believe that although the government is stepping in, that it will become a government run trainwreck. No politician has the balls to put his career on the line by personally trying to fix this. It should be just a market boost in confidence of the companies, and therefore in the housing market itself. Hopefully this will increase interest in these companies debt(funding), reducing the cost and thus reducing interest rates. I may be completely wrong, but this is a major event, so lets keep this thread going, i want to hear from everyone that has any ideas/insight.. |
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peter
4547 Posts |
Posted - 09/07/2008 : 9:22:28 PM
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In another similar thread on this subject, there is
information on Bill Gross of Pimco, the world's largest
bond fund. Pimco is going to buy the MBS which is now
guaranteed by the U.S. Government and this will be a good
sign of coming increased liquidity that could result in
improving interest rates. With the MBS being guaranteed
by the U.S. government, overseas investors will have more
confidence and this would help bring about the mood for
revival, if not an immediate revival itself, for the
months to come.
Peter |
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KSCOTTMIDACAP
101 Posts |
Posted - 09/07/2008 : 9:28:52 PM
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| Thats exactly what i've been reading, the fact that these MBS securities are government backed, it should help liquidity, and thus rates. |
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peter
4547 Posts |
Posted - 09/07/2008 : 9:35:54 PM
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Asian Stocks, U.S. Futures Rally on Fannie, Freddie Takeover
By Patrick Rial and Shani Raja
Sept. 8 (Bloomberg) -- Asian stocks surged the most in eight months and U.S. futures jumped after the U.S. government seized control of Fannie Mae and Freddie Mac, shoring up global financial markets reeling from more than $500 billion in credit losses.
http://www.bloomberg.com/apps/news?pid=20601087&sid=alHBtu5geop0&refer=home
Peter |
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KSCOTTMIDACAP
101 Posts |
Posted - 09/07/2008 : 9:44:47 PM
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| This is a short term solution. Allowing the treasury to buy MBS, which again, should be good for rates, but what about the long term options/implications with a new white house in january. I see the only two long term solutions as either making this a short term fix, restructuring and then reprivatizing the companies, or fully integrating long term government control into the housing market. My instict tells me that that the former would be better, but has either presidential candidate given their position on this. Anyone have any thoughts on what would be better and who would bring us there???? |
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jillstatz
657 Posts |
Posted - 09/07/2008 : 9:52:41 PM
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quote:
Originally posted by KSCOTTMIDACAP
This is a short term solution. Allowing the treasury to buy MBS, which again, should be good for rates, but what about the long term options/implications with a new white house in january. I see the only two long term solutions as either making this a short term fix, restructuring and then reprivatizing the companies, or fully integrating long term government control into the housing market. My instict tells me that that the former would be better, but has either presidential candidate given their position on this. Anyone have any thoughts on what would be better and who would bring us there????
I believe up to this point both of the canidates have tried to avoid the subject of the "mortgage meltdown"...with government take over they are probably both going to have to give their views on it at this time real soon. |
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KSCOTTMIDACAP
101 Posts |
Posted - 09/07/2008 : 9:56:30 PM
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quote:
Originally posted by jillstatz
quote:
Originally posted by KSCOTTMIDACAP
This is a short term solution. Allowing the treasury to buy MBS, which again, should be good for rates, but what about the long term options/implications with a new white house in january. I see the only two long term solutions as either making this a short term fix, restructuring and then reprivatizing the companies, or fully integrating long term government control into the housing market. My instict tells me that that the former would be better, but has either presidential candidate given their position on this. Anyone have any thoughts on what would be better and who would bring us there????
I believe up to this point both of the canidates have tried to avoid the subject of the "mortgage meltdown"...with government take over they are probably both going to have to give their views on it at this time real soon.
Hopefully, or else we should protest to push the election till they do....
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peter
4547 Posts |
Posted - 09/07/2008 : 10:23:45 PM
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I watch TV and saw Sarah saying that Fannie and Freddie
are too big and should be downsized into a smaller house.
If elected as V.P., she is most likely implementing her
concept and if she would be doing that we could see Fannie/
Freddie being reformed again organization-wise. But she
won't be able to do much as a V.P. as Congress will have
to discuss among committees and to pass a new law by
voting cencensus to restructure Fannie/Freddie without
an adverse impact on the worldwide financial market who will
have owned bic chunkds of MBS by that time and may not
want to see the face value being threatened by a big change.
Peter |
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oldmlb
138 Posts |
Posted - 09/07/2008 : 10:51:53 PM
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Well, I think we've all seen what happens when the secondary market all but disappears as is evidenced by the all round prosperity that we've been experiencing in housing and lending sectors. Another year of this and I'll be selling the pigs and chickens, and then the farm too.
Assurance by the feds that the Fannie/Freddie paper is as safe as Ginnies will bring the big buyers back into the MBS market, lower their yield requirements, calm things down for at least a little while. Perhaps even long enough to begin to put a bottom under housing prices.
I don't believe for one minute that this will relieve the full court press on the Mortgage Broker sector. I still think that to sell to the agencies, more new requirements will be put in place that limit entry to the club at the very least. For those that can't qualify at certain net worth levels, be prepared to go to the retail employment model. TPO's (conventional) are getting almost impossible to sell even now and I don't see that getting any easier. Countrywide is still buying like wild men but I don't think BofA will let that go on indefinitely.
I'm continuing my business which is mostly private lending, my wife is going with a retail shop, and we're opening some other business lines to diversify revenue. Embrace the new normal. |
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KSCOTTMIDACAP
101 Posts |
Posted - 09/07/2008 : 10:52:59 PM
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| i think McCain is for for reprivatization, no? Wouldn't that hopefully lead to them being as large/small as the market dictated?? Maybe I'm just overly optimistic... |
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