Here's an investigation of what's happening with mortgages that go into default in the manufactured housing segment. FRE and FNM are having to sell the homes at LESS THAN HALF OF THEIR MORTGAGE VALUE. I think what's going to happen at FRE and FNM is possibly the single most important microeconomic issue that the US will face in 2006 - 2008.
What happens when the ponzi scheme (aka the housing bubble) really hits the fan? Will the US taxpayers be forced to bail FRE and FNM out to avoid a financial meltdown?
Full disclosure - I hold a small June 2006 short option on FNM. Thinking of buying a June 2007 put option too. I don't see how they can escape this disaster.
MANUFACTURED HOUSING
AN INVESTIGATION BY THE SUN NEWS
U.S. government-chartered mortgage companies Fannie Mae and Freddie Mac have foreclosed on at least 46 homes worth $4 million in the Laurel Woods neighborhood since 2002, according to an analysis of real estate data by The Sun News.
In 29 of the foreclosures, Fannie Mae and Freddie Mac resold the homes within months for less than half of their mortgage value. Six of the homes were resold for between 50 percent and 60 percent of their mortgage value, and the remaining 11 homes haven't sold.
The track record in Laurel Woods is a microcosm of the dangers Fannie Mae and Freddie Mac face when they rely on largely unregulated finance companies to ensure that borrowers are qualified for, and can repay, the loans they get.
"Fannie Mae and Freddie Mac don't have a lot of control over the people out there approving these loans," said Tom Maeser, president of the Fortune Academy of Real Estate in Myrtle Beach. "All it takes is a few real creative and less-than-honorable mortgage people to get them in trouble."
The foreclosures haven't cost taxpayers directly because Fannie Mae and Freddie Mac mortgages aren't backed by the federal government as some people believe.
But what happens to those companies determines the fate of the nation's housing market because Fannie Mae and Freddie Mac hold or guarantee nearly half of all mortgages in the U.S.
January 08, 2006
The Nightmare: Freddie and Fannie selling forclosed inventory for half of mortgage value (ouch!)
Subscribe to:
Post Comments (Atom)
12 comments:
Fannie Mae and Freddie Mac also have been embroiled in accounting scandals since 2003, in which at least $9 billion in losses weren't recorded to make the companies appear more profitable to investors.
David Tice, whose Prudent Bear Fund mutual fund makes money by short-selling stocks that Tice thinks are about to lose value, told Barron's magazine in November that Fannie Mae is on the edge of a downfall because it has purchased too many loans made to buyers with marginal creditworthiness.
"We believe there's a housing bubble," Tice told Barron's.
"This whole phenomenon of lending with essentially nothing down to a lot of consumers scares the jeebers out of us. Fannie has been instrumental in helping that along. It's just a matter of when - not if - this real-estate bubble pops to what degree, and Fannie will be one of the companies most hurt."
So much for the one-day 10% rise in FNM this past Tuesday. Man what a gift for a potential short-seller that was. It will be interesting to see what happens with this story out.
Looks like they took a bath on those mortgages, which were only in the $100K range. If FNM is as careless in unloading properties at half-price in the future, it would take 20,000 losses of $150K to wipe out their $3B of cash.
I will be buying a jan '07 put option on FNM. Nothing major - like $5k. This week's mistaken head-fake on FNM (which was based on a Rudman quote which was kaboshed later by Rudman) is indeed a gift for new short positions to be established on Monday
FNM will be at the center of the future congressional hearings on the causes (and effects) of the bubble.
The systemic breakdown was FNM and FRE buying mortgages they knew nothing about (from unscruplous local mortgage brokers).
Would you buy billions of dollars of something you knew nothing about, had no personal connection with, and had no oversight of?
keith_b - first time poster here (and not a happy one)......where are you getting your stock info from? after reading some comments on your board last week, I sold call options for FNM on Thursday nite after you reported the fake news on your blog.....but the stock went up again on Friday? what gives? i hope you get killed on your put option.....
i closed my position before end of market on friday to limit my losses (7k)
FNM the past week
1/6 53.80
1/5 53.18
1/4 48.75
1/3 48.74
Yikes! Why would you base your own personal financial planning on a blogspot (that you'd only recently begun reading no less!!!). Wow! I'm thinking you've got noone but yourself to blame here. Good/Better luck in future.
I know.....shame on me......I actually have been reading this blog for about a month, and figured that one of these times keith_b was going to get one of his stock calls right......
I guessed wrong.....I've learned my lesson.
uhh.....yes i did
i'm posting as anonymous because i don't want to have to fill out stupid registration forms just to post my frustration.....
and for the record, i am not an idiot (or a troll), though I am admitting I am an idiot for taking your advice
I have learned the hard way that you may be right about where the stock is heading in a short (put) situation, but the timing is tricky. It's never happens as fast as you expect, and you pay for the time in options.
what's weirding me out is that the picture of money burning. that's clearly a picture of the queen, which is what our (australian) money has on it.
i'm an american who moved from san diego to sydney. frying pan into the fire. people are even dumber here with regards to debt and housing prices.
Signage, though quite fundamental in nature, plays an important role in the home selling process, the yard sign should be two-sided, easy to read, and look great. defaced or worm signs can negatively impact curb appeal.
Link to this site: real estate listing
http://real-estatesales.info/
I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
the indexes easily.
Take a look at Wallstreetwinnersonline.com
RickJ
Hi there Blogger, a real useful blog.Keep with the good work.
If you have a moment, please visit my stock illustration site.
I send you warm regards and wishes of continued success.
Post a Comment