As if the housing market isn't bad enough already, now they're speculating on whether the secondary mortgage market under Fannie Mae and Freddie Mac could fold. That might really be the kicker, along with a collapsing dollar and soaring oil, to push the economy over the edge. Tighten your seat belts, folks. It might be a wild ride.
From Reuters: WASHINGTON (Reuters) - If anyone thinks the current U.S. housing downturn is bad now, things would get far worse if Fannie Mae or Freddie Mac were to suddenly stop buying mortgages, a move that would drive up the costs of home loans and devastate the economy.
Fannie Mae and Freddie Mac, the nation's two largest sources of mortgage finance respectively, recently reported combined losses of $3.5 billion. Borrowing costs have skyrocketed and investors have erased billions of dollars in each company's equity market capitalizations.
Few think the two companies are likely to pull out of the housing market, even temporarily. However, if the stream of home loan failures were to force the companies to suspend new mortgage investments, the market for mortgage bonds would "freeze up," said Tom Sowanick, chief investment officer of Clearbrook Financial LLC in Princeton, New Jersey.
http://www.reuters.com/article/reutersEdge/idUSN2318057620071123
If Fan and Fred DON'T pull back, the economy will STILL be devastated.
You can't make up for bad loans by getting the taxpayer to cover for them.
The use of F/F to take bad loans into their portfolios has been outrageous, and was so abused that they helped to create such a massive housing bubble that their continued participation cannot compensate for it. In fact, what on earth is the government trying to do by covering for mortgages in the first place?
If the government had tried to nationalize housing, you folk would have thrown a fit. But when the government erected these agencies to effectively do the same thing, you folks haven't said a thing.
The biggest asset crash in the history of mankind is here. The housing bubble is WORLDWIDE. Spain is finally crashing. The UK is in denial. Housing in Denmark and the Netherlands is STILL inflating (where "buying" at x8 your income is common). People are bidding up homes in South America and China.
About the only civilized place not participating in this outrage is Japan, where they had their huge property bubble around 1990, and it had deflated and stagnated for about 15 years.
So ... let F/F pull back. Those who signed for homes at x4 their income at high LTV should be foreclosed upon. Those who issued those loans should bankrupt. The investors who bought the securities based upon those loans should weep over their losses. BUT DON'T COME LOOKING FOR MY TAX MONEY TO BAIL THESE FUCKERS OUT!
Well said GZ.
I rec'd from a pal today.
Just a thought, maybe the predatory mortgage industry had ought to pay for its own bad debt? Just a thought :-) Course I always hate to see the bad guys win.
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The Plain Dealer
http://blog.cleveland.com/pdworld/2007/11/foreclosure_decisions_driven_b...
Foreclosure decisions 'driven by money,' judge says in scathing attack
Posted by Michael O'Malley November 17, 2007 05:41AM
A federal judge in Cleveland has accused the mortgage industry and its lawyers of hijacking the foreclosure system in the interest of profits and at the expense of homeowners and municipalities.
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My take on it is that people have a deep emotional desire for their own homes. I think you have a right to expect people working in such a highly regulated field as the financial industry is to be forthright in their dealings with you. To avoid being taken in by alot of these 'scams' you'd have to be a banker yourself. Just as you aren't required to be a mechanic to own a car - you shouldn't have to be a banker to get a house loan without being preyed upon.
What other crisis were the people who were taken advantage of blamed like this? Not in the S&L crisis. Not in the dot com crash. Not in the Enron crash. But in the housing market if people get into trouble for relying on heavily regulated professionals who lie to them and cheat them, these are the people who get blamed.
I say blame those who told the lies with the intention of profiting by them. But that's just me.