Here come the Freddie and Fannie bailouts...

[no_vaseline_IHB]

Near as I can tell, what's busted F&F is undercapitalziation, brought on in no small part by congressional mandates that they remain that way.

Considering that they are almost the only show in town (70% market share), I'd think they can create profits out of thin air and customers will either pay up on not be financed. Further, I have no idea what the exposure of thier loans going bad look like. I'm not saying you're wrong, I'm saying we have no way to judge it untill it comes out the other side.

(Many years ago, I did 'special assets' for a commercial bank. Awgee already knows this, but some of the other members might not.)

In any case, the point is moot. We were on the hook for the bonds long before they went busto. They went busto because of undercolateralization (working capital). While I find thier current plight distasteful as you do, what other line would you perfer the Feds do?

Bust F&F and cause a 50% decline in property values almost overnight - or worse? I can't even imagine the counterparty risk, as F&F failure would destroy the book value of every bank, everywhere. The liquidity squeeze would turn into the liquidity industrial bailer.

I edited this at 10:17 pm because CNBC World is running a banner that reads "American Socialism", and Jim Rodgers from Rodgers Capital just got done lambasting just about the same line. I reposted because for a minute I thought you lived in Coto, not Singapore. Either that or you sure appear to be channeling him.

 

[Fraychielle_IHB]

I don't get why Dow futures are up 2-3%.

This plan is going to cost money, and it's either going to come out of taxpayers' pockets in the form of either tax increases and/or increases in the % of tax revenues going to repay treasury interest, OR we can print more play money, make the USD even more worthless than it was before, and make $300/b oil a reality.

I read somewhere that the guarantee of the government is supposed to bring mortgage rates down. Yet I see spreads unchanged, worse yet even more. So much for the full faith and credit of the US government.

I find it really amusing that certain family members who own FNM common are actually optimistic that this conservatorship will result in profit for them. I pointed out that there are years worth of ARM and alt-A adjustibles resetting within the next two years and their belief is that come 10/1 the mortgage fairy will come and make everyone's ARM a 30-year fixed at 90% of fair market value. Kool-aid?

I'm going to take advantage of this fool's rally to sell some of my stuff. I have no desire to be the bagholder when the dust settles.

* * *

On the other hand, from where is this 10% preferred divvy going to go?

If the government can get the Frannie boat upright, they stand to reap a nice profit (80% of outstanding shares). So where does that go? Will it help us little people?

Stupid question, of course it won't.

 

[IrvineRenter_IHB]

I don't get why Dow futures are up 2-3%.

The stock market often does its own thing. Friday was the bottom of a short-term selloff. There was likely to be an oversold bounce to the upside today. The pundits will interpret the F&F news with this bounce, but there is no real correlation. It may be for some that this signals a stabilization in housing and lending, but that would be a false impression. Some will like that the government is "doing something." Don't be surprised if the markets rally into some key resistance levels today or tomorrow then turn south and make new lows.

 

[usctrojanman29_IHB]

I don't get why Dow futures are up 2-3%.

This plan is going to cost money, and it's either going to come out of taxpayers' pockets in the form of either tax increases and/or increases in the % of tax revenues going to repay treasury interest, OR we can print more play money, make the USD even more worthless than it was before, and make $300/b oil a reality.

I read somewhere that the guarantee of the government is supposed to bring mortgage rates down. Yet I see spreads unchanged, worse yet even more. So much for the full faith and credit of the US government.

I find it really amusing that certain family members who own FNM common are actually optimistic that this conservatorship will result in profit for them. I pointed out that there are years worth of ARM and alt-A adjustibles resetting within the next two years and their belief is that come 10/1 the mortgage fairy will come and make everyone's ARM a 30-year fixed at 90% of fair market value. Kool-aid?

I'm going to take advantage of this fool's rally to sell some of my stuff. I have no desire to be the bagholder when the dust settles.

* * *

On the other hand, from where is this 10% preferred divvy going to go?

If the government can get the Frannie boat upright, they stand to reap a nice profit (80% of outstanding shares). So where does that go? Will it help us little people?

Stupid question, of course it won't.

Mortgage rates are down about .50% from Friday due to the decrease of the credit risk spreads.

 

[graphrix_IHB]

USC, I think on Monday, things could get really ugly......

Oops... Dow up 293, Nasdaq up 28, S&P up 28, and the dollar is up. Only ones getting killed are Pandas who bet against the US for the long term.

 

[optimusprime_IHB]

USC, I think on Monday, things could get really ugly......

Oops... Dow up 293, Nasdaq up 28, S&P up 28, and the dollar is up. Only ones getting killed are Pandas who bet against the US for the long term.

LMAO ... the best part is for a guy who is sooo bullish on commodities and foreign currencies etc.. Panda never heard of Jim Rogers. GO FIGURE!!!

 

[no_vaseline_IHB]

USC, I think on Monday, things could get really ugly......

Oops... Dow up 293, Nasdaq up 28, S&P up 28, and the dollar is up. Only ones getting killed are Pandas who bet against the US for the long term.

LMAO ... the best part is for a guy who is sooo bullish on commodities and foreign currencies etc.. Panda never heard of Jim Rogers. GO FIGURE!!!

I don't think so. I think he's a hot money gambling degenerate action monkey who loves to chase big returns..........then complain about being busto later.

Anybody seen a chart of WaMu this morning? Yowza. F&F ain't helping them.

 

[usctrojanman29_IHB]

USC, I think on Monday, things could get really ugly......

Oops... Dow up 293, Nasdaq up 28, S&P up 28, and the dollar is up. Only ones getting killed are Pandas who bet against the US for the long term.

LMAO ... the best part is for a guy who is sooo bullish on commodities and foreign currencies etc.. Panda never heard of Jim Rogers. GO FIGURE!!!

I don't think so. I think he's a hot money gambling degenerate action monkey who loves to chase big returns..........then complain about being busto later.

Anybody seen a chart of WaMu this morning? Yowza. F&F ain't helping them.

Lehman isn't doing so hot either....look out below.

 

[Trooper_IHB]

Mortgage rates are down about .50% from Friday due to the decrease of the credit risk spreads.

My mortgage is with CFC. I have a 6% 30 yr fixed.

Soooo, the above statement caused me to call them out of curiousity ..... This was my quote:

5.5% 30 yr fixed, 2.625 pts, estimated $3200 3rd party fees (title, appraisal, escrow fee, app + credit fee, etc)..... So, a total of around $8000 to refi.

Uh, no...I don't think so.

So if anyone can get me 5.5% with ONE point, at some point in the future, shoot me a PM. Wishful thinking, I know....but a girl's gotta dream ! Here's to hoping rates drop like a rock.

815 FICO. No debt. 180K refi, no cash out, verifiable income/assets.

Edit: Oh yeah, no pre-payment penalty either.

 

[usctrojanman29_IHB]

Mortgage rates are down about .50% from Friday due to the decrease of the credit risk spreads.

My mortgage is with CFC. I have a 6% 30 yr fixed.

Soooo, the above statement caused me to call them out of curiousity ..... This was my quote:

5.5% 30 yr fixed, 2.625 pts, estimated $3200 3rd party fees (title, appraisal, escrow fee, app + credit fee, etc)..... So, a total of around $8000 to refi.

Uh, no...I don't think so.

So if anyone can get me 5.5% with ONE point, at some point in the future, shoot me a PM. Wishful thinking, I know....but a girl's gotta dream ! Here's to hoping rates drop like a rock.

815 FICO. No debt. 180K refi, no cash out, verifiable income/assets.

Edit: Oh yeah, no pre-payment penalty either.

I got my information from a mortgage broker I know on the wholesale rate...who knows how quickly lenders will adjust their retail pricing. Also, bloomberg also indicates that the spreads between Fannie Mae MBS bonds and corresponding treasury spreads have decreased over 40bps.

 

[ipoplaya_IHB]

Mortgage rates are down about .50% from Friday due to the decrease of the credit risk spreads.

My mortgage is with CFC. I have a 6% 30 yr fixed.

Soooo, the above statement caused me to call them out of curiousity ..... This was my quote:

5.5% 30 yr fixed, 2.625 pts, estimated $3200 3rd party fees (title, appraisal, escrow fee, app + credit fee, etc)..... So, a total of around $8000 to refi.

Uh, no...I don't think so.

So if anyone can get me 5.5% with ONE point, at some point in the future, shoot me a PM. Wishful thinking, I know....but a girl's gotta dream ! Here's to hoping rates drop like a rock.

815 FICO. No debt. 180K refi, no cash out, verifiable income/assets.

Edit: Oh yeah, no pre-payment penalty either.

Just watch penfed.org Troop and make sure you are a member. You can get 5.75% 30-year for .75 points right now... That's close to what you are looking for.

 

[ipoplaya_IHB]

Wow, rates did come down recently... I checked a lending source early last week, 30-year fixed jumbo conforming was 6.25 with no points. Same source is 5.875% with no points right now so close to a half point drop in rate of late.

 

[TeamworkHomes_IHB]

From the wholesale channel, 30 years fixed conforming, 5.75% at par (no point, no origination fee). FHA 30 year fixed, 5.5%.

Here is an e-mail I received this morning from one of wholesale lenders:

Quote starts:

To stabilize and to stimulate the housing and financial markets, the Federal Government is taking the following key steps.

· The GSEs will be allowed to increase their MBS portfolios through the end of 2009

· Treasury will be initiating a program to purchase GSE mortgage-backed securities (through December 31, 2009)

· Treasury has established a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac and the Federal Home Loan Banks

We believe that Treasury Secretary Paulson and the Bush Administration determined Fannie Mae and Freddie Mac were unable to perform their housing missions at a time when they were most needed because the GSEs were trying (unsuccessfully) to address safety and soundness issues associated with raising capital. As a result of this plan, Treasury has indicated that the GSEs will now not be under any pressure to sell assets.

In the short-term, we expect mortgage liquidity should improve. Rates should decline as the risk spreads built into the GSE pricing (due, in part, to fear of potential GSE failure) should be reduced if not eliminated. The extent of the decline will depend on what happens to Treasury yields in the coming days.

Without capital constraints in the near term and based on Secretary Paulson’s comments (see below) , we believe the new Fannie and Freddie will likely rollback at least some of their price increases and loosen underwriting requirements to some extent. It will be curious to see the MI reaction to this government intervention as their tightening of guidelines will now be “front and center” in the effort to expand mortgage financing availability.

We also believe Secretary Paulson’s call to examine the guaranty fee structure could lower those fees across-the-board. It will be interesting to see if the government-controlled GSEs will implement a Ginnie Mae-type flat fee structure and at what level.

On a longer term basis, there will be a “heavyweight” debate next year and beyond about the future size and structure of the GSEs (e.g. public or private entities). That debate will not occur until the new Congress and Administration take office next year.

Why did Treasury/FHFA take this action?

It appears to us that Treasury/FHFA lost confidence in Fannie Mae and Freddie’s Mac’s ability to support the housing recovery while, at the same time, addressing their safety and soundness responsibilities by preserving and raising capital. Below are some of Secretary Paulson and Director Lockhart’s remarks which lead us to this conclusion.

Director Lockhart said:

(bold and italics added)

“Their market share of all new mortgages reached over 80 percent earlier this year, but it is now falling. During the turmoil last year, they (the GSEs) played a very important role in providing liquidity to the conforming mortgage market. That has required a very careful and delicate balance of mission and safety and soundness. A key component of this balance has been their ability to raise and maintain capital. Given recent market conditions, the balance has been lost. Unfortunately, as house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated. In particular, the capacity of their capital to absorb further losses while supporting new business activity is in doubt. Today’s action addresses safety and soundness concerns. … The result has been that they have been unable to provide needed stability to the market. They also find themselves unable to meet their affordable housing mission. Rather than letting these conditions fester and worsen and put our markets in jeopardy, FHFA, after painstaking review, has decided to take action now. “

Secretary Paulson said:

“I attribute the need for today’s action primarily to the inherent conflict and the flawed business model imbedded in the GSE structure and the ongoing housing correction”. He added that he has “long said, the housing correction poses the biggest risk to the economy”.

“Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner” and that “the primary mission of these enterprises will now be to proactively work to increase the availability of mortgage finance including by examining the guaranty fee structure with an eye toward mortgage affordability”.

Comment

We have all seen the steps that Fannie Mae and Freddie Mac have taken to preserve and raise capital throughout this year. These measures have included raising prices on mortgages and tightening underwriting guidelines. As everyone is also aware, they have been aggressively trying to put back loans to seller-servicers who, in turn, are going back to originators.

Secretary Paulson in particular appeared to conclude that GSEs cannot serve two masters (i.e. its housing mission and its shareholders) during the housing crisis.

What does this mean?

To state the obvious, we are in uncharted waters. This plan is not a “silver bullet” that will address the underlying problems (i.e. record mortgage delinquency and foreclosures) that caused the need for this unprecedented action. MBA’s National Delinquency Survey last week indicated that over 9% of all mortgages are either delinquent or in the foreclosure process. While the new GSE approach to mortgage availability will increase the number of potentially eligible borrowers, it will likely not have any significant impact on affordability (borrowers must still qualify and make downpayments) in those markets where house prices increased the most during the “housing bubble” until house prices and borrower incomes are in line. With this as a caveat, below are our immediate thoughts.

· Short term goals

Two of the immediate goals of this action are: 1) “to increase the availability of mortgage finance” as Secretary Paulson said and 2) to lower mortgage interest rates through the Government guarantee of GSE debt.

· Long term objectives

On a longer term basis, the Government’s action yesterday raises the fundamental question about the government’s role in housing going forward. Secretary Paulson deferred the discussion of this question and the “flawed GSE business model” ( i.e. serving two masters ---public and private objectives) to the next Administration and Congress.

In this update, we will focus on short-term impact since the debate about the GSEs’ future structure and size will depend on who wins the election and the make-up of the Congress.

Short term Impact

For the housing industry, the short-term impact of the Government takeover appears to be positive.

· Mortgage rates should decline

· Liquidity should be increased

o GSEs should loosen standards (somewhat)

o GSEs should reduce fees including guaranty fees

· Some housing experts feel house price may stabilize sooner and the level of further house price decline will be moderated as a result

Potential Impact

· There could be a mini-refinance boom if the rate decline materializes.

o Hedging of servicing portfolios and pipeline problems will have to be addressed

· More aggressive GSEs could slow down FHA’s growth

o FHA appeared on the way to 50% market share later this year.

o What will be the impact on margins?

There are many questions to be answered in the coming days and weeks:

(Here are a couple)

· How will the MIs react?

o Their underwriting and pricing policies will be “front and center” if the GSEs take the actions we expect

· What will the new Fannie/Freddie management’s policy be on buybacks? Will they be more reasonable?

· On g-fees, will the GSEs pursue the Ginnie Mae approach (uniform g-fees across the board)?

· What will be the new GSEs do with respect to lender relationships (preferential pricing, etc.)?

End quote.

 

[usctrojanman29_IHB]

Wow, rates did come down recently... I checked a lending source early last week, 30-year fixed jumbo conforming was 6.25 with no points. Same source is 5.875% with no points right now so close to a half point drop in rate of late.

Yup, that sounds about right. I checked with my bank and they still haven't updated their rate sheets for the move in the secondary markets so I think there's probably still some lenders that haven't done it yet (I'm sure they'll be updated by tomorrow morning).

 

[Trooper_IHB]

Hey Ipo...do you know anyone that has actually used PenFed ? The rates are unbelievably good.

Quick question. One of the FAQ's is "Where will the closing take place". The answer is "you choose an attorney or settlement company of your choice". Does that mean I would have to find an escrow company ? Do CA lawyers do this ?

If anyone has any answer, please respond. If rates drop just a smidge bit more this week, I'll re-fi. Thanks!

 

[ipoplaya_IHB]

Hey Ipo...do you know anyone that has actually used PenFed ? The rates are unbelievably good.

Quick question. One of the FAQ's is "Where will the closing take place". The answer is "you choose an attorney or settlement company of your choice". Does that mean I would have to find an escrow company ? Do CA lawyers do this ?

If anyone has any answer, please respond. If rates drop just a smidge bit more this week, I'll re-fi. Thanks!

Someone on the blog said they had used them. Can't remember who though. I don't know anyone personally.

Aimloan.com quotes 5.75% with zero points and $2900 in costs for a $180K no cash refi. Penfed is good, but not out of the ballpark good on conforming and jumbo-conforming. I think Penfed's fees are only $900 or so if I remember correctly though.

 

[25w100k+_IHB]

Wow, rates did come down recently... I checked a lending source early last week, 30-year fixed jumbo conforming was 6.25 with no points. Same source is 5.875% with no points right now so close to a half point drop in rate of late.

Where the hell do you get rates like that?

I'm not looking for a jumbo and I was getting quoted much higher....

 

[ipoplaya_IHB]

Wow, rates did come down recently... I checked a lending source early last week, 30-year fixed jumbo conforming was 6.25 with no points. Same source is 5.875% with no points right now so close to a half point drop in rate of late.

Where the hell do you get rates like that?

I'm not looking for a jumbo and I was getting quoted much higher....

Research, research, research, 25...

 

[usctrojanman29_IHB]

Wow, rates did come down recently... I checked a lending source early last week, 30-year fixed jumbo conforming was 6.25 with no points. Same source is 5.875% with no points right now so close to a half point drop in rate of late.

Where the hell do you get rates like that?

I'm not looking for a jumbo and I was getting quoted much higher....

Shop around my good friend...check out bankrate.com, local credit unions, and a few good mortgage brokers (those are tough to find though). I wouldn't be suprised if this drop in rates get some people off the sidelines.

 

[usctrojanman29_IHB]

Wow, rates did come down recently... I checked a lending source early last week, 30-year fixed jumbo conforming was 6.25 with no points. Same source is 5.875% with no points right now so close to a half point drop in rate of late.

Where the hell do you get rates like that?

I'm not looking for a jumbo and I was getting quoted much higher....

Shop around my good friend...check out bankrate.com, local credit unions, banks, and a few good mortgage brokers (those are tough to find though). I wouldn't be suprised if this drop in rates get some people off the sidelines.