When will Fannie Mae implode?
February 22, 2007
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25 comments:
outstanding guaranteed mbs $ 1.300.000.000.000 trillion!
core capital 34.000.000 billion! (2003)
spread today 0,24 over us bonds!!!!!!!
i fear that they are too big to fail.
http://immobilienblasen.blogspot.com/2007/02/more-evidence-risk-premiums-are-little.html
Subprime lending rose from $150 billion in 2000 to $650 billion at the end of 2005, and now accounts for more than 20 percent of the mortgage market, the government says.
http://www.boston.com/business/personalfinance/articles/2007/02/21/fears_of_increased_mortgage_defaults_put_spotlight_on_subprime_lenders/
Keith,
MY BiL used to work there and I talked with him this weekend about this. They are only allowed to buy conventional fixed rate loans because they are risk averse.
BTW, you will love this, Ditech and many of the subprime lenders were heavy Repug donors and that is why oversight was so lax. People at FNM and Freddie saw some of this coming.
Ever notice that the Fannie Mae Logo's clouds look like a guy bending over about to fall on his face?
Ouch.
Does Fannie buy subprime loans?
Probably not - I don't know.
I certainly wont put my money there, but a collapse seems unlikely. The news seems to be about the subprime lenders who make these toxic loans and then cant get rid of them.
Of course it won't - stop being a herd of chicken littles.
I have to agree with jmf they are too big to fail. Just like the Roman Empire - the sun never sets for them either.
Fannie imploded over two years ago.
At this point nobody really knows how much money Fannie has lost in their MBS portfolio, their home loan portfolio, and especially their $1 trillion derivatives position.
However, it is moot how deeply Fannie has fallen since the federal government will, absolutely, bail out Fannie (Freddie and FHLBs too) no matter what.
My best estimate is that Fannie is probably already lost $50 billion or so and when it is all tallied up, will most likely have burned through $250 billion.
And please keep in mind, this is JUST Fannie. Not Freddie. Not the FHLBs. And especially not the private mortgage/MBS industry.
Grand total of all losses in my estimation: $2 trillion.
And it won't end there. The entire world's financial system is inexorably intertwined with the housing market via loan origination, servicing, MBS creation, MBS holding, MBS trading, derivatives, and all the related industries.
This WILL be "The Big One" folks. However, it will take several years to play out and won't proceed in a linear fashion. Rather you will see fits-and-starts as governments respond to the debt collapse with massive interventions.
Fannie Mae bought themselves a CON gress. They could be technically bankrupt as we speak and it wouldn't make any difference.
GSE Relief Act of 2009 is in the mail... SORRY, taxes.
hey blowfly: your condo-hotel go belly up???
“City officials and residents alike are irate about a developer’s decision to halt construction on a $250 million resort project because of slow condominium sales.”
“A downturn in the real estate market has affected condo sales and forced Centex to stop construction, Centex division president John Lenihan told City Council members at a meeting Tuesday. Lenihan said the local real estate market was ‘hot’ when the project began almost two years ago.”
“‘Now, we don’t have the sales,’ Lenihan said. ‘We are barely staying above water.’”
“Lenihan’s explanation left members of the council and residents fuming Tuesday. Vice Mayor Jon Netts said the golf course now resembles ‘Chernobyl’ because of the company’s sudden decision to delay construction. ‘There’s a wasteland in the middle of our city,’ Netts said.”
“The market for such ‘condotels’ has also cooled in Volusia County, said Ramon Rivera, president and owner of Coldwell Banker Cornerstone Realty in Edgewater. ‘It has softened and primarily because there is just so much of that inventory in the market,’ Rivera said.”
“Centex broke ground on its condominium hotel project in October 2005 and was expected to open it this year. Officials estimated it would bring nearly 300 jobs and generate $70 million in city and county taxes over 20 years.”
“Sixteen months later, a nearly completed eight-story condo unit and parking garage sit on the site surrounded by heavy construction equipment. The golf course is brown and unkempt.”
“Larry Stencel, who lives across the road from the golf course in Carlson Park Estates, said residents want city officials to resolve the matter quickly. ‘This is an embarrassment to the city because they were sold a bill of goods,’ he said.”
Thank you W for GREAT DEPRESSION 2!!!
never
I moved out of Wells Fargo yesterday. When they tried to save my acct, I told them I would not do business with a big sub prime lender that tried to sell me repackaged home loans when I went in for a simple CD. Their incentive to their bankers is transparent. The clerks obviously get bonuses for referrals and the banker who sells the junk WF owned municipal fund gets a sweet commission.
Wells Fargo, you are a dirty bank. Thank you for being so obviously greedy and corrupt so that I could make a healthy choice for my finances.
For such a big bank they sure made a fuss over my little withdrawal.
Fannie is releasing anywhere from 1000 to 3000 contract employees.
I have heard of employees hiding when they see vendors coming down the halls for fear that they are being let go. The situation over there is not good.
FNM had an accounting mess. They postponed realizing losses on derivatives because they said they had interest rate related GAINS on their MBSs.
The losses were known and published. The only question is REALIZING Them.
So if that's all it was, then I don't think it's as crooked as some say. Although they did postpone some expenses one year to get top management bonuses. I'm sure it's an country club good old boys' club, but I don't think they have huge losses unrealized.
They hedge their interest rate risk pretty well.
Problem is CREDIT RISK. They insure 1.3T or whatever mortgages. Now these are 80% LTV. But they also insure the 80% LTV stub with the person borrowing the 20% downpayment from some other place or using PMI insurance.
Suppose PMI insurance goes bankrupt in the great unwinding? FNM could be exposed on 100% LTV.
Also they only buy mortgages up to 400K or something.
"Wells Fargo, you are a dirty bank. Thank you for being so obviously greedy and corrupt so that I could make a healthy choice for my finances.
For such a big bank they sure made a fuss over my little withdrawal".
I cant believe they are still selling those loans with all the bad press! Watch their interest rates jump up for MM and CD's in hope of attracting street money in to offset all those bad loans.
It's already happening to WaMu who is paying 5.20% on a 6 month CD. Also, Countrywide "Bank" has high paying interest as well.
Good for you Anon for pulling the plug on them.
God forbid Wells Fargo tries to make a profit by lending out money. And imagine that, they try to sell new products to their existing customers!!! My god the nerve of them, why they should be thrown in jail for upselling.
Idiots.
I dont care if the banks offered 20% interest on my money, i keep only what i need to make my minimal monthly payments for my bills...the rest comes out in cash and put in a safe place..I trust no one with my money.
Let Fannie die a swift death.
Just do it already for goodness sake.
First she runs up the price of homes to levels no sane person would buy at.
Then she proceeds to trash the whole econmy with this crap.
And we need Fannie for *what* again?
There are some things I agree with on this board, but the idea that Fannie Mae will collapse, or be bailed out on the cusp of an otherwise imminent collapse, is not an idea of mine. It is completely fallacy.
The person who mentioned 1000 to 3000 contract employees are being "let go" is obviously the first step that occurs when a restructuring happens at a reasonably prudent company. Get rid of the people that you outsource work to. It's quick, easy, and you don't need to give them severance pay.
Fannie already said they would review all staff positions to see if they will still be needed. After what they have been through over the past couple years, nobody should be surprised. But to say Fannie Mae will collapse doesn't seem plausible. They stick predominantly with conventional, fixed-rate mortgages and exercise very conservative methods when taking over loans.
If the accounting problems didn't come to light until now, I might agree with you that "going under" has a snowball's chance in hell. These problems have been out for a few years now. They have an army of outsourced accountants poring over the numbers. I think if some of these accountants thought the place was going to crash and burn, it would have leaked to the press by now.
Focus on something more plausible, like the almost inevitable collapse of Novastar this year (subprime loans) and the coming demise of FirstFed Financial in 2008 (80% of loans are negative amortization).
Butch, you are the man.
DemoRats will always protect Fannie Mae because it is their lovechild, just like the bankrupt social security system.
According to MarketWatch:
Fannie bought 45% of subprime loans in 2005. There was over $10 billion in accounting fraud under Clinton crony Franklin Raines.
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.
http://tinyurl.com/qp79k
God forbid Wells Fargo tries to make a profit by lending out money. And imagine that, they try to sell new products to their existing customers!!! My god the nerve of them, why they should be thrown in jail for upselling.
Idiots.
No, They repackage risky loans to get them off their books and are willing to sell them as mutual funds to the hand that feeds them. This is bad business. It is costing them large accounts. They are geting a bad reputation.
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