Nice to see the Senate Banking Committee take up the toxic mortgage (aka 'subprime') disaster unfolding on Wednesday. At least it's a start.
But as we all know, the #1 and #4 congressional bribers, the National Association of Realtors and the National Homebuilders Association, have made sure these guys are in the bag. So I don't expect great things.
And we could even be looking at another taxpayer-funded bailout a la Silverado and the S&L's, especially with the subprime implosion. Fannie and Freddie are gonna cost us trillions folks...
U.S. mortgage lending practices are "out of balance" and need to protect minority borrowers and those with less than pristine credit, Sen. Christopher Dodd, chairman of the Senate Banking Committee, said on Wednesday.
Lawmakers and many witnesses testifying at a hearing dubbed 'Preserving the American Dream' focused on borrowers who have been harmed by so-called subprime mortgages, traditionally higher cost loans aimed at borrowers with less than perfect credit histories.
Dodd, a Democrat from Connecticut, said he saw signs that homeownership "is under grave threat from predatory, abusive, and irresponsible lending practices undertaken by too many subprime lenders," Dodd said in an opening statement.
Foreclosure filings were up 42 percent in 2006 from a year ago in large part because of weakness in the subprime mortgage market, Dodd said, citing research from Realty Trac.
Civil rights leader Jesse Jackson, a witness at the hearing, cited statistics that 52 percent of mortgage loans to African Americans were "high-rate" in 2005, while 19 percent of mortgage loans to whites were high-rate.
"Lenders and brokers have financial incentives to place borrowers in more expensive loans," Jackson said.
During a five-year housing boom that ended in the summer of 2005, many lenders eased standards to many borrowers.
Dodd said "subprime credit can be a valuable tool in helping people become homeowners" but "the system is out of balance." He said he looked forward to working with brokers, bankers, regulators and Wall Street to "restore this balance for the sake of the safety and soundness of the banking system."
February 08, 2007
Get ready for the full blown Senate Housing Crash hearings (and some blow-hard blown-dry Christopher Dodd grandstanding)
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Fannie Mae's economist just had this to say:
"Real home-price gains, adjusted for inflation, will be negative this year, next year and possibly the year after that."
Ouch.
http://tinyurl.com/2j4jtv
“…This year we expect that over 30 percent of our employees will spend over half their time on it, and many more are involved. In addition we are bringing some 1,500 consultants on board by year’s end to help with the restatement…Altogether, we project devoting six to eight million labor hours to the restatement. We are also investing over $100 million in technology projects to enhance or create new systems related to accounting and reporting…we do not believe the restatement will be completed until sometime during the second half of 2006…”
It seems to us that anybody reading that press release should be shocked by what appears to be the paucity of knowledge about what is going on at a company of such great size and importance to the U.S. economy. About 18 months ago Fed Chairman Greenspan stated that problems at both Fannie Mae and Freddie Mac had the potential to bring down the financial system. He stated at the time that, “…Most of the concerns associated with systemic risks stem from the size of the balance sheets that these GSEs (government-sponsored enterprises) maintain…”. He added that the immense size of their holdings and the need to keep growing to satisfy their shareholders made them increasingly vulnerable.
http://www.freerepublic.com/focus/f-news/1464248/posts
None of these clowns had jacksh*t to say about the subprime shenanigans during the run up. Too busy touting the so-called "ownership society". Now that it's starting to blow up in the faces of thier constituents they want to ride to the rescue. They can all suck me. Vote buying scumbags. Term limits please. 1 6 year senate tour and two 2 year house tours and send 'em home. No lifelong pension and medical benefits either. Bet they would be more sensible with their stupid legislation if they knew they would be directly affected by it themselves.
JAFO
Keith,
I believe Fannie and Freddie are only allowed to hold traditional 30 year fixed. So subprime does not affect them directly. But if and when there is a price implosion, then it will.
Why do they all have hair like that?
Metro - couldn't be farther from the truth. Fannie and Freddie are the big subprime bagholders.
http://tinyurl.com/qp79k
Subprime exposure
Fannie has traditionally specialized in higher-quality, fixed-rate mortgages, which are less vulnerable to interest-rate fluctuations and volatility in the housing market.
But the company has been investing more in subprime MBS in recent years. Subprime loans are sold to home buyers who fail to meet the strictest lending standards, so this area of the mortgage market is expected to be hit harder by any housing downturn.
Fannie and Freddie bought 25.2% of the record $272.81 billion in subprime MBS sold in the first half of 2006, according to Inside Mortgage Finance Publications, a Bethesda, Md.-based publisher that covers the home loan industry.
In 2005, Fannie and Freddie purchased 35.3% of all subprime MBS, the publication estimated. The year before, the two purchased almost 44% of all subprime MBS sold.
Three big lenders, NovaStar Financial, Deutsche Bank and BNC Mortgage, part of Lehman Brothers, sold more than half of their subprime MBS to Fannie and Freddie this year, said Andrew Analore, editor at Inside Mortgage Finance.
And Freddie Mac is reclassifying delinquencies like mad (Footnote #12) so they don't have to count them in their statements. Simply, if they reach a new payment plan for the debtor, they're out of the delinquency pool. Nevermind whether or not they actually turn things around.
So, in how many other places is the same thing going on??????????
Keith,
Thanks for the 18Sep06 MarketWatch link about Fannie's subprime exposure. I've just popped it on our sidebar.
They have hair like that because it is the official helmut of Washington DC. If you don't wear a helmut, you're not allowed on the field.
I heard a good one over the Superbowl weekend in Miami: guess who's buying up all the condo towers that are due for CO's in the second and third quarter this year--whose buyers are speculators and will never close? Hedge funds.
Fasten your seat belts, ladies and gentlemen.
Metro - couldn't be farther from the truth. Fannie and Freddie are the big subprime bagholders.
++++++++++
So now we know why Fannie and Freddie can't seem to get their financial accounts in order. They are BANKRUPT and the government has buried the news to save consumer confidence and, thus, the economy.
Fannie and Freddie are the oversite for home lending especially for the low income borrower. They package subprime loans and sell them on the open market. Problem is they don't have a clue which ones are bad and where the documentation can be found. They also set the loan limit for conforming and jumbo loans.
This is as bad as it gets for housing. Noone is minding the store!!!
The hair bothers me....problem is mine looks like that!
But I'm not trying to fleece the world!!!!
He looks like he just smelled his sh*t and found out it wasn't made of marble!
Question - What happens when the government tries to solve problems?
Answer - Fannie and Freddie
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