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propertylender.c
1276 Posts |
 Posted - 10/11/2008 : 10:53:34 PM
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Fannie, Freddie to buy a lot more mortgages - report
Finance giants reportedly ordered to buy $40 bln of mortgage bonds a month
By Marke*****ch
Last update: 4:58 p.m. EDT Oct. 11, 2008Comments: 102SAN FRANCISCO (Marke*****ch) -- Federal regulators have ordered Fannie Mae and Freddie Mac to start buying $40 billion of troubled mortgage bonds each month as the U.S. government tries to revive the economy, according to a published report.
A story from Bloomberg News on Saturday reported Fannie (FNM:Fannie Mae
began telling bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, Bloomberg said, citing three unidentified people familiar with the situation.
The purchases would be separate from the U.S. Treasury's $700 billion bailout plan, which was signed into law earlier this month, Bloomberg noted.
Fannie and Freddie were taken over by the U.S. government in early September, in the first of several bailouts the government has launched recently to try to halt the spread of the mortgage-fueled credit crisis.
Regulators initially restricted Fannie and Freddie's growth when they seized control. To "promote stability" and lower mortgage costs to borrowers, Treasury Secretary Henry Paulson said the two companies would be allowed to "modestly increase'' their mortgage portfolios to as much as $1.7 trillion through the end of next year and said they would no longer be run "to maximize shareholder returns."
Less than two weeks later, Fannie and Freddie were told to ramp up their mortgage bond purchases as the financial crisis deepened and credit activity came to near standstill, Bloomberg said.
Fannie and Freddie own or guarantee almost half of all home loans in the U.S., so they're vital to the health of the residential real estate market.
http://www.marke*****ch.com/news/story/fannie-freddie-told-buy-40/story.aspx?guid=%7BE12BEB1C%2D85D5%2D4B43%2D91CD%2DB6A4AB87F630%7D
This is on market watch.com
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RodneyLO
821 Posts |
Posted - 10/12/2008 : 10:54:55 AM
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Why does this forum alter that link?
Copy/paste, remove space:
http://www.market watch.com/news/story/fannie-freddie-told-buy-40/story.aspx?guid=%7BE12BEB1C%2D85D5%2D4B43%2D91CD%2DB6A4AB87F630%7D
This should add a bunch of liquidity to the MBS market. I would assume Fannie/Freddie will then hold these damaged goods, and not resell to ordinary secondary market buyers.
I could see them being packaged & auctioned at some point. |
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propertylender.c
1276 Posts |
Posted - 10/12/2008 : 12:08:36 PM
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quote:
Originally posted by RodneyLO
Why does this forum alter that link?
Copy/paste, remove space:
http://www.market watch.com/news/story/fannie-freddie-told-buy-40/story.aspx?guid=%7BE12BEB1C%2D85D5%2D4B43%2D91CD%2DB6A4AB87F630%7D
This should add a bunch of liquidity to the MBS market. I would assume Fannie/Freddie will then hold these damaged goods, and not resell to ordinary secondary market buyers.
I could see them being packaged & auctioned at some point.
I do not know why either. |
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RodneyLO
821 Posts |
Posted - 10/12/2008 : 12:53:02 PM
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From the NYT:
quote:
Still, Treasury has directed Fannie Mae and Freddie Mac, the government-controlled mortgage giants, to ramp up their purchases of hard-to-sell mortgage bonds, in what could be a speedier and less formal process than the auctions proposed by the Treasury.
Read Here: http://www.nytimes.com/2008/10/12/business/12imf.html?ref=business |
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peter
4543 Posts |
Posted - 10/12/2008 : 3:57:11 PM
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This is good news! Banks and lenders will be able to
free up their inventories of bad loans and can re-lend into
the market this time with better underwriting and better
loan originations into A paper. It's like getting rid of
bad loan inventories, free up cash, and originate new and
better loans in A paper and resell them to Fannie/Freddie.
This is a step in the right direction by the Treasury.
Peter
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clarenceworley
4200 Posts |
Posted - 10/12/2008 : 4:05:41 PM
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| Good news I guess, considering. |
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peter
4543 Posts |
Posted - 10/12/2008 : 4:49:55 PM
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Can anyone give a guestimate of total inventories of
subprime, Alt-A, and troubled A paper loans, now being held
by various lenders and banks? At the rate of $40 billion
of buying by Fannie/Freddie per month, how many months will
it take to buy up and clean out at least 50% of the exisiting
industry's inventories? At that point, liquidity and normal
lending should return and guidelines relaxed.
Peter |
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quasigovy
494 Posts |
Posted - 10/12/2008 : 5:14:11 PM
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quote:
Originally posted by peter
Can anyone give a guestimate of total inventories of
subprime, Alt-A, and troubled A paper loans, now being held
by various lenders and banks? At the rate of $40 billion
of buying by Fannie/Freddie per month, how many months will
it take to buy up and clean out at least 50% of the exisiting
industry's inventories? At that point, liquidity and normal
lending should return and guidelines relaxed.
Peter
Pete,
You have seen my predictions play out.
My math, which includes loans yet to go bad, has it at about 30 months.
How about the fact that they will begin buying stck in financial companies?
I value Wells Fargo, now at $28, at $7.
I value Bank of America, now at $21, at $5.
I value Goldman Sachs, now at $90, at $30.
Combine this with the fact that the gov now for the most part owns Fannie...... well, you do the math.
I think they are making this entire ordeal much worse in the long run. That is not good when you consider how bad it was going to get anyway.
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quasigovy
494 Posts |
Posted - 10/12/2008 : 5:19:30 PM
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quote:
Originally posted by peter
This is good news! Banks and lenders will be able to
free up their inventories of bad loans and can re-lend into
the market this time with better underwriting and better
loan originations into A paper. It's like getting rid of
bad loan inventories, free up cash, and originate new and
better loans in A paper and resell them to Fannie/Freddie.
This is a step in the right direction by the Treasury.
Peter
Pete.
Not to be rude, but you are wrong.
You will not see lending get easier because of this. What has happened is that the possibility of our government going bankrupt has been brought into the realm of possibilities. I know that sounds radical, but these moves do bring it into the conversation.
You should not be happy about this. It does nothing to help you but may really jhurt you. It could really hurt all of us. |
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quasigovy
494 Posts |
Posted - 10/12/2008 : 5:30:02 PM
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Let me explain it this way.
The reason you are having trouble placing loans is not because the banks need to get rid of the bad loans first, it is because we have now realized that over 50% of the people who we thought should qualify do not. This does not change that.
All this does is take the mistakes made by people who were already rich and place those mistakes on the hands of our governemnt. This then becomes all of our problem.
The richest poeple in the country just got bailed out, not us. |
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homebroker@sbcgl
3435 Posts |
Posted - 10/12/2008 : 7:30:57 PM
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How do you come to those numbers, is this factoring in the diluting of these stocks when the Government buys in and increases the number of shares?
quote:
Originally posted by quasigovy
quote:
Originally posted by peter
Can anyone give a guestimate of total inventories of
subprime, Alt-A, and troubled A paper loans, now being held
by various lenders and banks? At the rate of $40 billion
of buying by Fannie/Freddie per month, how many months will
it take to buy up and clean out at least 50% of the exisiting
industry's inventories? At that point, liquidity and normal
lending should return and guidelines relaxed.
Peter
Pete,
You have seen my predictions play out.
My math, which includes loans yet to go bad, has it at about 30 months.
How about the fact that they will begin buying stck in financial companies?
I value Wells Fargo, now at $28, at $7.
I value Bank of America, now at $21, at $5.
I value Goldman Sachs, now at $90, at $30.
Combine this with the fact that the gov now for the most part owns Fannie...... well, you do the math.
I think they are making this entire ordeal much worse in the long run. That is not good when you consider how bad it was going to get anyway.
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quasigovy
494 Posts |
Posted - 10/12/2008 : 8:07:44 PM
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No. I am simply using the current stock. The model used by Goldman is outdated and no longer functional, a fact pointed out by several experts. Wells and Bank of America, if they had to disclose the true value of thier portfolios, would be insolvent.
They only reason I value any of these companies at more than $0 is that the government will not let them fail. You have to understand that Wells and B of A have moved option arms and equity lines to what is called "level 3 assets", which means they do not have to put a value on them for now. Most of the pay options and equity lines are now worth an average of 10 cents on the dollar on the open market right now. If the banks had to mark these assets to market on Monday, they would be bankrupt by Tuesday.
What we have here is a massive shell game. I hope it works, but we will have unintended consequences. One of which may be the bankruptcy of our government in 5-10 years. I know that sounds crazy, but we also have a war we are paying for.
OR...... these loans are good loans like the bank says, and the market is treating them unfairly. In this case, the taxpayers are getting a good deal.
Which do you think is true? Is the market unfairly punishing these assets, or are they they garbage the market says? If they are worth more, why isn't anyone buying them for more? Is the government just a shrewd buyer?
I oversaw a ton of these loans go from broker to MBS, and I say they are GARBAGE.
quote:
Originally posted by homebroker@sbcglobal.net
How do you come to those numbers, is this factoring in the diluting of these stocks when the Government buys in and increases the number of shares?
quote:
Originally posted by quasigovy
quote:
Originally posted by peter
Can anyone give a guestimate of total inventories of
subprime, Alt-A, and troubled A paper loans, now being held
by various lenders and banks? At the rate of $40 billion
of buying by Fannie/Freddie per month, how many months will
it take to buy up and clean out at least 50% of the exisiting
industry's inventories? At that point, liquidity and normal
lending should return and guidelines relaxed.
Peter
Pete,
You have seen my predictions play out.
My math, which includes loans yet to go bad, has it at about 30 months.
How about the fact that they will begin buying stck in financial companies?
I value Wells Fargo, now at $28, at $7.
I value Bank of America, now at $21, at $5.
I value Goldman Sachs, now at $90, at $30.
Combine this with the fact that the gov now for the most part owns Fannie...... well, you do the math.
I think they are making this entire ordeal much worse in the long run. That is not good when you consider how bad it was going to get anyway.
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ML
3006 Posts |
Posted - 10/12/2008 : 9:34:48 PM
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quote:
Originally posted by quasigovy
No. I am simply using the current stock. The model used by Goldman is outdated and no longer functional, a fact pointed out by several experts. Wells and Bank of America, if they had to disclose the true value of thier portfolios, would be insolvent.
They only reason I value any of these companies at more than $0 is that the government will not let them fail. You have to understand that Wells and B of A have moved option arms and equity lines to what is called "level 3 assets", which means they do not have to put a value on them for now. Most of the pay options and equity lines are now worth an average of 10 cents on the dollar on the open market right now. If the banks had to mark these assets to market on Monday, they would be bankrupt by Tuesday.
What we have here is a massive shell game. I hope it works, but we will have unintended consequences. One of which may be the bankruptcy of our government in 5-10 years. I know that sounds crazy, but we also have a war we are paying for.
OR...... these loans are good loans like the bank says, and the market is treating them unfairly. In this case, the taxpayers are getting a good deal.
Which do you think is true? Is the market unfairly punishing these assets, or are they they garbage the market says? If they are worth more, why isn't anyone buying them for more? Is the government just a shrewd buyer?
I oversaw a ton of these loans go from broker to MBS, and I say they are GARBAGE.
quote:
Originally posted by homebroker@sbcglobal.net
How do you come to those numbers, is this factoring in the diluting of these stocks when the Government buys in and increases the number of shares?
quote:
Originally posted by quasigovy
quote:
Originally posted by peter
Can anyone give a guestimate of total inventories of
subprime, Alt-A, and troubled A paper loans, now being held
by various lenders and banks? At the rate of $40 billion
of buying by Fannie/Freddie per month, how many months will
it take to buy up and clean out at least 50% of the exisiting
industry's inventories? At that point, liquidity and normal
lending should return and guidelines relaxed.
Peter
Pete,
You have seen my predictions play out.
My math, which includes loans yet to go bad, has it at about 30 months.
How about the fact that they will begin buying stck in financial companies?
I value Wells Fargo, now at $28, at $7.
I value Bank of America, now at $21, at $5.
I value Goldman Sachs, now at $90, at $30.
Combine this with the fact that the gov now for the most part owns Fannie...... well, you do the math.
I think they are making this entire ordeal much worse in the long run. That is not good when you consider how bad it was going to get anyway.
They are garbage if you grade them on a pass/fail basis. That is, if the normal process were to take its course up thru and including foreclosure. The Gov't intervention allows for a grade of Incomplete, essentially buying time to renegotiate, or wait for the RE market to improve before selling. It's like putting mortgages into BK, rather than a ch.7 liquidation, it's a ch.13 workout!
The numbers I've seen are not as dire as you predict, yes 2005-2006, but the rest, not as bad. Helocs & seconds are toast, but the firsts have a good bit of value. Hell, some people even put 20% down when they bought their house, with no intention of flipping!
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GianniD
213 Posts |
Posted - 10/13/2008 : 06:43:12 AM
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Time to tighten up all lending guidelines.
The only way to make MBS a safe/secure investment again is to make them safe and secure. Jamming a sub prime POS borrower into an FHA loan doesnt make them a good risk.
Require at least 10% down, require at least a 680 score, or, manually UW credit if there are indicators that applicant credit worthiness is better than their score.
I heard 10 days ago that over 60% of borrowers these days are just not good credit risks. If so, WHY lend to them? |
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lucky1s
3614 Posts |
Posted - 10/13/2008 : 09:37:15 AM
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They dont actually mean true "sub-prime", right?
When they refer to fannie freddie?
I have never seen a fannie freddie 2/28 - 80/20. |
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propertylender.c
1276 Posts |
Posted - 10/13/2008 : 2:10:42 PM
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quote:
Originally posted by clarenceworley
Good news I guess, considering.
It is. |
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Scrooge McDuck
8753 Posts |
Posted - 10/13/2008 : 2:14:34 PM
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| im pretty sure, looking at it from an LO's perspective, this is the best news to come out in a while. |
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wadeger
362 Posts |
Posted - 10/13/2008 : 2:26:16 PM
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| 40,000,000,000 divided by average mortgage amount $200,000 = 200,000 loans they can buy with the money.... simple math, but does 200,000 loans put a dent into the overall problem.... i am not sure, but perhaps somebody can let me know. |
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mojojojo_1
838 Posts |
Posted - 10/13/2008 : 5:17:12 PM
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| do the banks continue to service them? should get moddy with it to turn them into preforming loans. |
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peter
4543 Posts |
Posted - 10/13/2008 : 9:09:23 PM
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The government's buying into major banks may also help in
addition to this $40 billion a month mandatory purchases of
troubled loans by Fannie/Freddie. Here are some exerpts of
today's news from Bloomber:
"It's a good thing, it's what needs to happen, it will allow the markets to start functioning again,'' said Ralph Cole, a vice president for research at Ferguson Wellman Capital Management Inc. in Portland, Oregon,"
"Governments are ``tackling the root of the problem,'' said Christopher Wong, who helps manage about $25 billion in assets as investment manager at Aberdeen Asset Management Asia Ltd. in Singapore. ``They're putting confidence back into the market by not just adding liquidity but adding strength to the banks that serve Main Street.''
Only time will tell. Few drops of water are better than nothing.
Peter
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BanditJimmy
26 Posts |
Posted - 10/13/2008 : 9:20:57 PM
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quote:
Originally posted by GianniD
Time to tighten up all lending guidelines.
The only way to make MBS a safe/secure investment again is to make them safe and secure. Jamming a sub prime POS borrower into an FHA loan doesnt make them a good risk.
Require at least 10% down, require at least a 680 score, or, manually UW credit if there are indicators that applicant credit worthiness is better than their score.
I heard 10 days ago that over 60% of borrowers these days are just not good credit risks. If so, WHY lend to them?
The goal is to revive the housing market not to shut it down completely.
Your plan would shut it down for good.
What's the point of the investment by the MBS if there will be no risk? If there is no risk then might as well start selling them Vanilla Ice Cream.
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benjamin
2196 Posts |
Posted - 10/14/2008 : 04:42:14 AM
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Last numbers I heard were 4 million foreclosures. I would estimate much more. This means 4 million or more people that can't buy for years. As more homes come on market, prices will continue to drop.
This is not the time to tighten credit. |
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Coffee Is 4 Clos
1635 Posts |
Posted - 10/14/2008 : 06:48:53 AM
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| Umm, most people nowadays would consider 100LTV and 95LTV deals by Fannie to be sub prime- LOL. |
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GianniD
213 Posts |
Posted - 10/14/2008 : 07:11:23 AM
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quote:
Originally posted by BanditJimmy
quote:
Originally posted by GianniD
Time to tighten up all lending guidelines.
The only way to make MBS a safe/secure investment again is to make them safe and secure. Jamming a sub prime POS borrower into an FHA loan doesnt make them a good risk.
Require at least 10% down, require at least a 680 score, or, manually UW credit if there are indicators that applicant credit worthiness is better than their score.
I heard 10 days ago that over 60% of borrowers these days are just not good credit risks. If so, WHY lend to them?
The goal is to revive the housing market not to shut it down completely.
Your plan would shut it down for good.
What's the point of the investment by the MBS if there will be no risk? If there is no risk then might as well start selling them Vanilla Ice Cream.
How many BC lenders would actually lend their own money to their clients?
FHA WILL, without a doubt, have major delinquency problems over the next several years as many of the BC borrowers, esp those with no skin in the game. How exactly does this help the market?
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nw@8brook
144 Posts |
Posted - 10/14/2008 : 10:53:53 AM
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perhaps most fha loans are owner occupied and have an actual debt income ratio?
quote:
Originally posted by GianniD
quote:
Originally posted by BanditJimmy
quote:
Originally posted by GianniD
Time to tighten up all lending guidelines.
The only way to make MBS a safe/secure investment again is to make them safe and secure. Jamming a sub prime POS borrower into an FHA loan doesnt make them a good risk.
Require at least 10% down, require at least a 680 score, or, manually UW credit if there are indicators that applicant credit worthiness is better than their score.
I heard 10 days ago that over 60% of borrowers these days are just not good credit risks. If so, WHY lend to them?
The goal is to revive the housing market not to shut it down completely.
Your plan would shut it down for good.
What's the point of the investment by the MBS if there will be no risk? If there is no risk then might as well start selling them Vanilla Ice Cream.
How many BC lenders would actually lend their own money to their clients?
FHA WILL, without a doubt, have major delinquency problems over the next several years as many of the BC borrowers, esp those with no skin in the game. How exactly does this help the market?
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quasigovy
494 Posts |
Posted - 10/15/2008 : 10:12:55 PM
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quote:
Originally posted by ML
quote:
Originally posted by quasigovy
No. I am simply using the current stock. The model used by Goldman is outdated and no longer functional, a fact pointed out by several experts. Wells and Bank of America, if they had to disclose the true value of thier portfolios, would be insolvent.
They only reason I value any of these companies at more than $0 is that the government will not let them fail. You have to understand that Wells and B of A have moved option arms and equity lines to what is called "level 3 assets", which means they do not have to put a value on them for now. Most of the pay options and equity lines are now worth an average of 10 cents on the dollar on the open market right now. If the banks had to mark these assets to market on Monday, they would be bankrupt by Tuesday.
What we have here is a massive shell game. I hope it works, but we will have unintended consequences. One of which may be the bankruptcy of our government in 5-10 years. I know that sounds crazy, but we also have a war we are paying for.
OR...... these loans are good loans like the bank says, and the market is treating them unfairly. In this case, the taxpayers are getting a good deal.
Which do you think is true? Is the market unfairly punishing these assets, or are they they garbage the market says? If they are worth more, why isn't anyone buying them for more? Is the government just a shrewd buyer?
I oversaw a ton of these loans go from broker to MBS, and I say they are GARBAGE.
quote:
Originally posted by homebroker@sbcglobal.net
How do you come to those numbers, is this factoring in the diluting of these stocks when the Government buys in and increases the number of shares?
quote:
Originally posted by quasigovy
quote:
Originally posted by peter
Can anyone give a guestimate of total inventories of
subprime, Alt-A, and troubled A paper loans, now being held
by various lenders and banks? At the rate of $40 billion
of buying by Fannie/Freddie per month, how many months will
it take to buy up and clean out at least 50% of the exisiting
industry's inventories? At that point, liquidity and normal
lending should return and guidelines relaxed.
Peter
Pete,
You have seen my predictions play out.
My math, which includes loans yet to go bad, has it at about 30 months.
How about the fact that they will begin buying stck in financial companies?
I value Wells Fargo, now at $28, at $7.
I value Bank of America, now at $21, at $5.
I value Goldman Sachs, now at $90, at $30.
Combine this with the fact that the gov now for the most part owns Fannie...... well, you do the math.
I think they are making this entire ordeal much worse in the long run. That is not good when you consider how bad it was going to get anyway.
They are garbage if you grade them on a pass/fail basis. That is, if the normal process were to take its course up thru and including foreclosure. The Gov't intervention allows for a grade of Incomplete, essentially buying time to renegotiate, or wait for the RE market to improve before selling. It's like putting mortgages into BK, rather than a ch.7 liquidation, it's a ch.13 workout!
The numbers I've seen are not as dire as you predict, yes 2005-2006, but the rest, not as bad. Helocs & seconds are toast, but the firsts have a good bit of value. Hell, some people even put 20% down when they bought their house, with no intention of flipping!
The numbers I have seen show the more recent Alt-A originations defaulting at a much quicker rate than 2005-2006.
Buckle up!!!!!!!!!!!!!!!!!!!!!!!!
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