Comments on: Straight from the Horse’s Mouth – Fannie on Why the Mortgage Market Keeps Trading Lower

By: Susan

Susan — Fri, 07 Mar 2008 21:26:42 +0000

Michael Blomquist-

God I hope you are right that , ultimately, the government will just let Fannie and Freddie fail. I’m also praying it will come quickly, like within a year. They have done nothing but drive up the cost of housing for Americans. Disgusting.

By: Confused

Confused — Fri, 07 Mar 2008 19:45:04 +0000

So this will help whom? Just wondering? Nothing good will come from allowing those who really couldn’t handle their mortgage(s) before the loan limit increase to now have a higher loan limit. This still only helps those that really dont need the help.

By: Michael Blomquist

Michael Blomquist — Fri, 07 Mar 2008 14:44:21 +0000

Here’s the scoop. The real stimulus package is not a stimulus package at all. We know that $600 per person will not do anything to stimulate the economy, this is butt, a little lubricant for the nasty business done behind back doors.

The “temporary” loan increases have some clear definitions $417k – $729.750k 125% ltv and in some cases up to 175%. I have not seen anything regarding stated-income, credit scores, etc.

THE REAL DEAL IS THAT THERE ARE NO PORTFOLIO LIMITS DURING THIS “TEMPORARY” INCREASE!

Open up the flood gates: FHA, Fannie & Freddie will begin buying everything in sight. Trillions in toxic waste will make its way to the Treasury/taxpayers and unsuspecting “investors”. I believe/hope they will shove most of the bunk debt in Fannie or Freddie and let them fail. Government Sponsored Entity… not backed like the FHA.

By: Torphy

Torphy — Fri, 07 Mar 2008 14:38:05 +0000

Right. How much pressure would the purchase of $170B worth of MBS, of varying classes, release? How much better would the economy function from that action in comparison to a tax rebate? These are of course just unanswerable questions.

By: Morgan

Morgan — Fri, 07 Mar 2008 04:56:52 +0000

Sensible Lender » I agree – with Fannie and Freddie likely to stop buying stated income loans these high loan amounts will only benefit those that have the true income to qualify – which i fear is a much smaller number than those with existing loans of this size.

By: Toby

Toby — Fri, 07 Mar 2008 04:35:16 +0000

One might expect a federal backing of FNMA/FHLMC in exchange for an equity positition. This would allow the banks and other financial institutions to buy GSE pools without increasing reserves, and to certainly calm the private bond markets. The explicit backing could be for say five years, after which I hope the market has recovered and it could be removed along with a sale of the government’s equity position in the GSEs. Ideally, the government might even gain $$ on this deal much like the Brady bonds (Mexican bonds) in the 1980s.

By: Sensible Lender

Sensible Lender — Fri, 07 Mar 2008 03:45:34 +0000

Yes, notice how FNMA’s net yield has shot up even as treasury yields dropped the last few days.
FNMA lost $3.55 B and FHLMC lost $2.5B in the 4th Q. Have you seen how much their stock prices have dropped in the last 9 months?

The GAO today reported that our friends “pose potentially significant risks” to the US Taxpayer…. And we expect them to help “bail out” with higher loan limits?
It has been established that the “jumbo-conforming” loans from $417,000 to 729,750 will be segregated into their own MBS. The question is what rate will these loans have if you cannot even give away the MBSs that contain them. Over concentration of jumbo loans in troubled markets such as California, propensity of jumbo borrowers to prepay (ruin investor’s yields), uncertain liquidity of these new securities make them especially “enticing” for investors….

OK, borrower’s wanting a 30 year fixed, with full doc, 20%+ equity, good credit scores may get a few basis points off their rate compared to now. This will be a gift to wealthy homeowners with significant equity in no danger of losing their home. Maybe they will spend the $50 monthly savings in interest, and help the economy. But the current investor of their mortgage will get $50 less in income per month to spend……