David Saks: A Wolf in Sheep's Clothing : The Death of Fannie and Freddie

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

A Wolf in Sheep's Clothing : The Death of Fannie and Freddie

                                               wolf sheepwolf

Can't you see it coming? Somebody's pulling the wool over your eyes.

Could this attempted government buyout of Freddie Mac and Fannie Mae actually be an attempt by the government to end the privatization of the oversight of mortgage backed securities and merge the two private corporations into one government owned corporation that we call "Ginnie Mae", the Government National Mortgage Association", and thus take control of housing financing?

After all, Freddie and Fannie control over 5 trillion dollars worth of 12 trillion dollars of the total U.S. housing financing market. That buyout would give the government control of the industry, a lions share, and some stalwart control over your property and your investments.

And just what does Ginnie Mae do, you may ask?

Ginnie Mae basically does the same thing that Fannie Mae and Freddie Mac do, but under the watchful eye of the government and the United States Department of Housing and Urban Development, HUD.

GNMA, or Ginnie Mae, supposedly guarantees, backed by the pledges and money of the government, the full and on-time payments of all of the monthly pricipal and interest payments of mortgage backed securities to the registered holders of these investments.

Mortgage backed securities, or MBS as we call them, are issued through the oversight of private investment firms like savings and loans and mortgage bankers and marketed with the assistance of security brokers. These securtities are actually large pools of residential mortgages of a large variety, including fixed rate conventional and hybrid adjustable rate loans, that are guaranteed or insured by the Federal Housing Administration (the FHA), the Veterans Administration (the VA), and the Farmer's Home Administration (the FmHA) 

The pickings are ripe for investors looking for bargains just like the one Bank of America got with that first 2 billion dollar infusion, and just like the one JP Morgan-Chase got by setting a Bear trap.

"But Grandmother!  What big ears you have," said Little Red Riding Hood as she edged closer to the bed.

"The better to hear you with, my dear," replied the wolf.

"But Grandmother!  What big eyes you have," said Little Red Riding Hood.

"The better to see you with, my dear," replied the wolf.

"But Grandmother!  What big teeth you have," said Little Red Riding Hood her voice quivering slightly.

"The better to eat you with, my dear," roared the treasury secretary, Chairman Bernanke, HUD and the President.

And that's the story of how the U.S. government took control of all private property and Fannie Mae and Freddie Mac became Ginnie Mae. 

If this buyout is successful and approved by the Senate is it also intended to produce the gradual demise of the right to own private property in America?

Watch out for the wolf !!!




David Saks



Time&Temp Memphis

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Comment balloon 75 commentsDavid Saks • July 16 2008 01:20AM

Comments

Your post is bold and I respect you for that. Right now things are in chaos mode and people are going to extremes. There's no need to assume anything.

Posted by Kevin Wood,, Tucson, AZ Realtor (Keller Williams Southern Arizona) over 11 years ago

Are we having mutton for dinner, Kevin?

Posted by David Saks ((retired)) over 11 years ago

David, Can you suggest a better alternative at this moment?, When the government stepped in it was a big save for this country. Temporary measures or permanent is up for debate but make no mistakes any other cure in the short run would have been worse over all for the economy and for the real estate business in general. Steve

Posted by Steve Loynd, 800-926-5653, White Mountains NH ( Alpine Lakes Real Estate Inc., ) over 11 years ago

Things happen for a reason....something good always comes out of a bad thing.  We just don't relaize at first, but it will.

Roxanne Schilling, Realtor at Lake Tulloch

Posted by Roxanne Schilling (Coldwell Banker Lake Tulloch) over 11 years ago

Steve, under this plan, the government buyout would allow Fannie and Freddie to trade certain assets for cash at the Federal Reserve's discount window in the event of an emergency. The Treasury secretary would have the absolute authority to increase Fannie Mae and Freddie Mac's $2.25 billion credit lines whenever he wants to and negotiate terms under which the government would purchase their stock up to a controlling interest.

Paulson said, "Use of either the line of credit or the equity investment would carry terms and conditions necessary to protect the taxpayer."

What are those terms, and are they designed to insure the failure of those corporations the same way hybrid and teaser adjustable rate mortgages trapped unsophisticated borrowers? I know that's extreme, but the government has the strings.

The treasury giving money to Freddie and Fannie is like giving a drunk panhandler with cirrhosis of the liver spare change to buy another bottle of booze, and knowing full well that the drunk's condition is terminal, and that the next drink might kill him. A little different from originating a no doc loan at 100% to a stranger.

My suggestion is that Paulson stays out of it. Concerns are realisitic because of the alleged corporate fraud said to have been perpetrated by the Fannie Mae CFO recently, and 53 million dollars in bonuses paid out to their execs.

Click here to read it

Thanks for your comment.

Posted by David Saks ((retired)) over 11 years ago

Bad things get worse, Roxanne. The financial market as we know is coming to an end. Investors have lost confidence in the government. Fannie shares plummeted today. Thanks for commenting.

Posted by David Saks ((retired)) over 11 years ago

David, write something light and funny and quit scaring the wits out of me. : )

Posted by Barbara S. Duncan, GRI, e-PRO, Executive Broker, Searcy AR (RE/MAX Advantage) over 11 years ago

Boooooo~~~~~~~oooooooo.....Barbara :-)

caspar

Posted by David Saks ((retired)) over 11 years ago

ps....might I be the Edgar Allen Poe of Real Estate blogging ?

Posted by David Saks ((retired)) over 11 years ago

Much better, David!  I love the happy friendly expression on that person's face!!

Posted by Barbara S. Duncan, GRI, e-PRO, Executive Broker, Searcy AR (RE/MAX Advantage) over 11 years ago

Caspar the Friendly Ghost makes me smile too, Barbara.

Posted by David Saks ((retired)) over 11 years ago

Government is trying to finish the privatization by ending the firm of Freddie Mac and Fannie Mae. I think it is a initial step of government to stop privatization.

__________________________________________________________________________

jerry

<a href="http://www.viviennemarcheline.name">Vivienne Marcheline</a>

Posted by JERRYFLOWER over 11 years ago

You might be right, Jerry. Maybe the government is beginning to embrace Marxism and Leninism too, while Russia and China become democratic ? They don't have have McDonalds and Starbucks in Moscow and Beijing for nothing. There are real capitalists at work pouring coffee and flipping Big Macs. What about the Miss Universe Pageant in Ho Chi Minn City ?

Posted by David Saks ((retired)) over 11 years ago

ok so being Canadian........who the heck are Fannie, Ginney, Frankie, Tom Dick and Jerry..?.......love the Head Roll....-)

Posted by Liz Moras Migic, Chilliwack, British Columbia - Realtor over 11 years ago

David...

You are so right on with this. It's sad to see what's because of private enterprise in the housing industry. It's just another step toward complete socialism, and yet the citizens are demanding it. Congrats on the Gold Star, you're the man!

Posted by Richard Weisser, Richard Weisser Retired Real Estate Professional (Richard Weisser Realty) over 11 years ago

That floating head has to go.  I tried reading your post but your stupid head kept getting in the way.  What's the point with that thing?

Posted by Tim Maitski, Truth, Excellence and a Good Deal (Atlanta Communities Real Estate Brokerage) over 11 years ago

LOL @ Tim.  Interesting post, David.  I can be an extreme thinking type of guy, but this seems a bit over the top... or is it?  There's a bit of chaos going around and when chaos is abounding, we must walk cautiously.  This should create some interesting discussion, I'm sure I'll return.  Kind of like that floating head;-)

Posted by Jason Sardi, Your Agent for Life (Auto & Home & Life Insurance throughout North Carolina) over 11 years ago

Good Post David - it's a scary thing when government intervenes - the taxpayer is totally vulnerable while politicians and CEO/CFOs get fat. 

I don't like what I see on the horizon, call it whatever a wolf in sheep's clothing, whatever analogy you want to use but, please let's not bury our our in the sand and think the government buyout is going to be good for the taxpayers.

There ARE more viable efforts that the government COULD make, a buyout is an over-correction and will cause a crash - just like when you over-correct when steering a car.

Posted by Wendy Smith, Real Estate Advisor (Wendy Smith Real Estate) over 11 years ago

p.s. the moving head is rather annoying.

Posted by Wendy Smith, Real Estate Advisor (Wendy Smith Real Estate) over 11 years ago

Had to park the head on the sidelines.  Very distracting.

Not sure what the longterm implications are to the governments move (time will tell) but I think the alternative of not having the bail out would have been the death knell on our industry and the economy.  Things were spinning out of control.  Our mortgage broker said he would have been OUT OF BUSINESS since these are the only loans he works with.

Posted by Kathy Anderson, Arizona Homes For Sale, Sun City Grand (Arizona Luxury & Lifestyle Living) over 11 years ago

Since both Fannie Mae and Freddie Mac are already quasi government entities like Amtrak and the Federal Reserve now, it's not too much of a stretch to see the fed taking over fully or changing managment.

Posted by Jim Lee, Portsmouth NH Realtor, Portsmouth, NH (RE/MAX Shoreline) over 11 years ago

The bank failures in the Great Depression made todays' turmoil look rosy in comparison.  I'm sure people were screaming the same thing back then-that Roosevelts' New Deal would lead to complete socialism of the Capital Markets.  Did it happen?  Of course not.  Will there be some Gov intervention into Fannie and Freddie?  Maybe (even Probably).  But your assertion that the Govt will completely take over our industry is way too much of a stretch.  Are new rules and regulations needed on the lending sector?  Yes.  Alt A loans were created in the capital markets, and these type of instruments may be reigned in by the Govt (they already have been eliminated by market forces for the time being).

Posted by Robert Smith over 11 years ago

You do not know how close you are to the truth.   The same way people do not know that Social Security is not broke, but it is a cash trough for the pigs on the hill to take the cash as it comes in the door for their other programs.  The same thing happened when the Post Office was spun off as a quasi agency years ago...they became profitable...Congress saw this, and placed it back under budget so they could your the excess cash flow for their other pork barrel projects.  When they did this, the Post Office went back into running deficits, and the price of postage rises all the time for more money.  The cash at Fannie and Freddie would be unbelieveable and too tempting to be under control of the Government.    I have more insight on the topics having worked in DC, and in a position where we would deal with Congress, and before we did...it is important to understand the dynamics of what is really happening.

Posted by Jim Crawford, Jim Crawford Atlanta Best Listing Agents & REALTOR (Maximum One Executive REALTORS®) over 11 years ago

The government will not federalize the GSEs. It will not happen. Furthermore, it is this kind of uninformed speculation that perpetuates the problems we see in the credit and equity markets.

Posted by Hunter Palmer (Regions Mortgage) over 11 years ago

Great comments here David.  I think whenever the government takes more control, that is a bad thing.  It will be interesting to see how this all pans out.

Posted by Patricia Beck, Colorado Springs Realty (RE/MAX Properties, Inc., GRI, CDPE) over 11 years ago

Someone aboved asked if David would suggest anything else... Well, yeah the Government stepping in was a big save from the mess that the Government created. Stop spending our tax dollars on elaborate projects like spying on innocent Americans and the war in Iraq and we could find ourselves in a more equitable position... But instead America is being sold across the world!

Posted by Christopher Ohlsen (Credit Werx, LLC.) over 11 years ago

Very interesting theory and angles. 

I guess the outcome remains to be seen :)

Posted by Renée Donohue~Home Photography, Western Michigan Real Estate Photographer (Savvy Home Pix) over 11 years ago

Firstly, thanks to all for your comments thus far, and I will certainly attempt to address each one as the day moves forward. They are, indeed, illuminating and thoughtful, take serious issue with the tragic state of the economy (which I believe will improve), and provide greatly needed further, appended insight into the matter.

Additionally, in response to the floating head, thanks to those for the comments who enjoy it, and additionally, to those who don't. The further down the blog you advance, the head will begin to disappear and become less distracting. If you leave your mouse cursor stationary it won't follow you. I created it with a java script that most nearly gave me the effect I intended to convey:

The illusion of a Busby Berkeley chorus line ! :-)

I could replace my head with a Rockette, but Bob, Jon and Brad might not like that. :-) I'm honored to be featured and I say many, many thanks to all for supporting, enjoying and reading my rants, ruminations and musing.

Hope this day finds all of you, my friends, in excellent health and much happiness.

More to come.

Posted by David Saks ((retired)) over 11 years ago

yes just wanted to comment again and congratulate you on your feature!

Posted by Liz Moras Migic, Chilliwack, British Columbia - Realtor over 11 years ago

Hi Liz. They're publicly and privately owned government sponsored enterprises and corporations that were chartered to purchase mortgages from lenders and resell them to investors in what we refer to as the secondary mortgage market. They also package mortgages backed by the Federal Housing authority, the FHA, but they also sell some non governmentally backed mortgages as well. Shares of these institutions are traded on the New York Stock Exchange.

Their prices usually tend to go up when interest rates go up, and the reverse is true when interest rates fall because making money on mortgages depends on the direction of interest rates.

By selling their loans in the secondary market, the original lenders can raise the cash they need to support additional lending possibilities for borrowers and build their liquidity. The mortgages originated by these lenders are purchased by these agencies in the secondary market who in turn create pools of mortgages repackaged as mortgage backed securities, which they might refer to as participation certificates or pass-through securities, and sell to investors.

The primary market is where it begins, which resides within the sphere of the homebuyer  and the mortgage lender that originates the loan.

Hope I've shed a little more light on the subject for you. Hope your having a great week, too.

Posted by David Saks ((retired)) over 11 years ago

ps...thanks, Liz. I'm honored by your compliment.

Posted by David Saks ((retired)) over 11 years ago

Thank you, Richard. I apologize for being a bit tongue-in-cheek, perhaps, but I didn't want to take up too much of everybody's valuable time. I also didn't want my blog entry to take up any more time that it would take one to finish a donut and a cup of coffee :-) .

Hope your having a fine day, my friend, as everyday.

Posted by David Saks ((retired)) over 11 years ago

Hey Tim, that's my stupid head your tossing around up there :-)

I can't please all of the people some of the time and none of the people all of the time, but my stupid head just goes on floating most of the time :-)

You can call it my head trip ! Don't lose your head over it ! Life's a wonderful thing !

Posted by David Saks ((retired)) over 11 years ago

Bold post and great piano playing on your profile...(I thought that was a very nice personal touch).

While I'm not excited about what lays ahead, I personally don't have any good alternative suggestions to the powers that be.  I tend to agree with Robert that difficult times call for difficult measures.  Whether this is the right choice or not, only hindsight will give us that answer.

 

Posted by Melina Tomson, Principal Broker/Owner, M.S. (Tomson Burnham, llc Licensed in the State of Oregon) over 11 years ago

Thanks Jason. If the government believes they can pick up a bargain and infuse the secondary market with more opportunities they'll go for it, and I think it's possible to merge with Ginnie or cover Ginnie's bases. Three heads might be better than one according to the treasury's infinite wisdom. I know it's a bit extreme, but hypothesis, speculation and cataclysm seem to represent the natural chain of progression in this volatile economic climate.

It's always nice to hear from you and I appreciate your comments.

Posted by David Saks ((retired)) over 11 years ago

Is it a true demise of Freddie & Fannie or is it forcing the agencies to evolve  ?  When Wall Street and other investors from around the globe decided that Residential homes should be a considered a commodity thru the financial vehicle of a mortgage this was the beginning of the end for Freddie & Fannie , as well as our country's economy

In many of the "Bubble" cities across the country the govt loans died out in 1999/2000 based on the maximum loan amount for the area vs the sales prices , that were escalating. The private sector was more than willing to create as many 'exotic" loans as possible just to see how long it would take for the bubble to burst. Corporate greed was in play , not fulfilling the "American Dream" 

A bail-out  by the federal govt was inevitable , who are we in the industry or the private  money sector for that matter to dictate how to get our country's economy back on track. Many of those who created this mess are long gone and somebody has to clean it up right wrong or indifferent.

Freddie & Fannie have both been carrying millions of dollars of old REO debt that they haven't been able to sell and will never be able to sell in this current real estate market & economy. Their attempts to liquidate these holdings a few months back met with dismal results , and forced the upper echelon to cut their losses now instead of waiting for things to get worse. I would much rather they fall on the sword now before things get worse then act as if they have everything under control.

I agree with previous comments , time will tell , but those of us that are left standing will continue to move forward and do what we do best.

 

Note:

Now David ,I usually have to read your blogs two or three times as I look at things in a much more simplistic view , (being a country girl and all) I always appreciate how thought provoking they are and appreciate the comments and sometimes banter that accompany them.

 

 

Posted by Laura Gray (RE/MAX Realty Group) over 11 years ago

Wendy, bargain basement opportunities are prolific, with the exception of North Sea crude oil. The government's got it's hand out like the scavengers on Scrooge's doorstep while poor Scrooge lie on his death bed. The vultures are circling over Fannie and Freddie's carcases.

It'll get better, but my prediction (much in opposition to the industry cheerleaders with phony enthusiasm) is seven to ten years, 2015 or so, about the same amount of time it takes a debtor to discharge a bankruptcy from their credit record by accumulating a fresh and responsible borrowing history.

Equifax, Experian and Trans Union would probably give the government an average FICO score of 450.

Good to hear from you.

Posted by David Saks ((retired)) over 11 years ago

David,

Going to be interesting to see how this all plays out. Congrats on the Activerain feature and thanks for the informational post!

Your friend in Dyersburg

Posted by Mike Frazier, Northwest Tennessee Realtor (Carousel Realty of Dyer County) over 11 years ago

ps...Wendy...Again, the cursor is a head trip.

Posted by David Saks ((retired)) over 11 years ago

David -- I have been watching the reporting of Aunt Fannie and Uncle Freddie with interest.  If I have my facts straight, I believe both Fannie and Freddie experience default rates of less than 1%. . . .makes your wonder what is triggering a desperate need for government intervention.

Posted by Lori Gilmore, Realtor - Will County Illinois (Baird & Warner Real Estate) over 11 years ago

Restrictive, tighter lending is an industry anomaly, but a good one, Kathy. Gone is the variety. Making lending less profound for the borrower is the motive. My head is spinning :-)

Posted by David Saks ((retired)) over 11 years ago

David, I think this is a facinating theory....after so many astounding things that have happened...I would not be surprised. I also find the floating cursor head facinating. I do think Sardi got it right with Tim...LOL! Provocative read!

Posted by Jeanean Gendron, Specializing in Selling Unique Properties (The Address Realty) over 11 years ago

I agree with everyone who said this is a very interesting and thought-provoking post.  Right now I just read and watch...wondering if there are a dozen shoes still to fall or what.  By the way, I too had problems reading your post because of the head...it's cool but gets in the way.

Posted by Diane Aurit, Lake Norman Real Estate (LKN Realty, LLC) over 11 years ago

Fannie and Freddie made it clear today, as did Bennie (Bernanke), that the government is persona non grata, Jim. Many thanks for your comment, and I'm very pleased to hear from you.

Posted by David Saks ((retired)) over 11 years ago

Correction, Robert Smith, I never made any firm assertion; only an interrogative, along with what I believed my readers would find to be an interesting but highly implausible story, diminutive in scale compared to the reality of the problem, although an excuse to generate lively, thought challenging, provocative discussion, of which, additionally, includes your thoughtful comment.

Posted by David Saks ((retired)) over 11 years ago

Your absolutely right, Jim, and I completely agree. The pork barrels are filling up with rinds, skins, peelings, scrapes from bad decisions. Not kosher :-) Hope your having a fine week and it's always great to hear from you.

Posted by David Saks ((retired)) over 11 years ago

With the possibility of a Democrat in the White House along with Democrat control of the House and Senate... de-privitizing Fannie and Freddie could be a real possibility.  We've already had another democrat suggesting that the government seize oil production and refining in the US. 

Posted by Lane Bailey, Realtor & Car Guy (Century 21 Results Realty) over 11 years ago

Comments like yours, characterized by negation, denial, opposition and resistance, having no positive features, are especially challenging and, I might add, hypocritical, Hunter Palmer. How much information do you think my readers could derive from your 30 word entry designed, and inclined, to discredit, especially without positive or helpful suggestions?

First of all, Ginnie Mae, the Government National Mortgage Association, is federalized, is under the control and authority of a federal government, does the same thing as Freddie and Fannie, is a division of the Department of Housing and Urban Development, but is organized as a corporation without capital stock. It has always worked with Fannie Mae in secondary market activities.

When money is tight, Ginnie and Fannie dance together and have a program they administer jointly called The Tandem Plan, of which I may be safe by assuming you know nothing about. The Tandem Plan says that Fannie can purchase high risk, low yield, FHA loans at full market rates. Fannie can purchase other types of loans under the Tandem Plan as well.

And who insures these purchases ?

None other than Ginnie Mae. Sweetheart Ginnie guarantees payment of these loans and absorbs any difference between the low yield and the current market prices.

I wouldn't be so certain that the GSE's are as invulnerable as you perceive them to be.

Come back when you have something informed to say, and have a nice day, whether your losing money or not.

Posted by David Saks ((retired)) over 11 years ago

Thank you, Patricia. I agree with you. It's nice to hear from you.

Posted by David Saks ((retired)) over 11 years ago

Interesting comment, Christopher. Thanks for your entry. Hope your having a fine week.

Posted by David Saks ((retired)) over 11 years ago

Indeed, it does remain to be discovered, Renee'. Nice to hear from you.

Posted by David Saks ((retired)) over 11 years ago

I'm honored by your comment, Melina, and thank you for your response.

Rather than try to understand the nature of an event after it's happened, maybe we should focus on preventing it before it actually does happen.

Posted by David Saks ((retired)) over 11 years ago

Laura, I consider the prospect of evolution principally at the expenditure of stockholders of a publicly owned, government sponsored, corporation publicly traded on the New York Stock exchange. Would the government be any less restricted from an acquisition and merger of the two publicly traded corporations into Ginnie Mae, or any other secondary market entity, any less than they would from excercising the right of public domain to build a new highway? I think not. To the contrary, residential mortgages and repackaging them for investors also served as a mitigating factor for originating lenders assuring liquidity in the primary lending arena.

Government loans began dying in 1999 because of the national wave of the artificial inflation of property values by property assessors for ad valorem taxation. This thoughtless action led to the crippling of the economy by advancing equities in an economic climate, short of the resources or securities pledged for the repayment of any loan, which was intended to easily inflate the coffers of state and local treasuries without having to put a property tax increase to a vote. It was a smooth con and rippled across America and allowed assessors to tap to the increased values in our homes, and create new and excessively higher values for more tax money for the county and city property tax collectors, all the while foregoing the discussion on the tables of city councils nationwide. It was pandemic and disasterous. I predicted the outcome ten years ago. The blame was passed off in every ridiculous, predictable direction. Like a bad movie script with a predictable outcome.  High property taxes also make it more difficult to stay in step with appreciation and create some unbeknownst condition of equalization. Other factors such as foreclosure, tax liens, divorce, bankruptcy and crime influence price decline. High property taxes seem to keep prices stable, to a degree.

The "American Dream" has never been clearly defined by cheerleaders of our faultering industry as to whether or not that dream would become a good dream or a nightmare until now, and, indeed, the American Dream is now the "American Nightmare" for hundreds of thousands, if not millions, of homeowners in our nation. I deplore the use of the term "American Dream" when referring to homeownership because it attempts to delineate or mask unfairly the lines of qualification needed to benefit and places it in the perspective of the surreal or unrealistic, and is further characterized by fantastic imagery and incongruous juxtapositions. I encourage all realtors and industry professionals to stop using that term when addressing homeownership.

Since Freddie Mac's corporate stock is owned by most savings and loan institutions across the nation, and also under the protection and watchful eye of the Federal Home Loan Bank System, made up of twelve regional banks in it's system, other forms of collateral are in place to support concerns regarding liquidity. The bank system continues to issue bonds and supply credit reserves to cooperating banks and mortgage lenders, so they shouldn't be too quick to fall on the knife, commit Hari Kari or any form of ritual suicide, as you suggest. Let those that believe such speak for themselves, although I hope that my consideration would serve in the interest of suicide prevention and intervention with the inclusion of the hope of restoring a healthy economy for all of us. Additionally, the inadequate performance of some aspect of the existing inventory may hinge upon their concerns regarding market correction. Those concerns are legitimate, affirm their position, and work In accordance with recognized and accepted standards.

If what we do best is stand and move forward in full view of a classification of propositions based on whether they claim necessity, possibility or impossibility I would caution that you do your best not to stub your toe while in motion.

Posted by David Saks ((retired)) over 11 years ago

Thank you, Mike. It's always a privilege to hear from you. Hope all are well in beautiful Dyersburg this hot Delta day.

Posted by David Saks ((retired)) over 11 years ago

Indeed, a curious factor, Lori. Interesting observation which demands further investigation. I wonder what the time table is for publishing default numbers? Many thanks for your comment. Hope your having a fine day.

Posted by David Saks ((retired)) over 11 years ago

Thanks, Jeanean. Many are bewildered and struck dumb with wonder. Hope your having a fine week.

Posted by David Saks ((retired)) over 11 years ago

Thank you, Diane. It's an arousing situation.

I'll modify the cursor script at some point when I have time.

Posted by David Saks ((retired)) over 11 years ago

Relevant remark, Lane. Thanks for commenting. Nice to hear from you.

Posted by David Saks ((retired)) over 11 years ago

David, interesting post and perspective.  If this were a Democratic administration I might agree with you.  President Bush - don't think so.  I'm sure that most of us are following this situation closely.  My take on it is that the Feds are trying to prevent another liquidity crisis based on word of mouth hysteria.  The media isn't helping with their 30 second sound-bytes.  I think that it would be counter productive to have a single source backing mortgages.

Bernake is saying that both Freddie and Fannie are sound, but they won't be if liquidity dries up...that's why the government must step in in the short term.

Posted by Kate Bourland, Onlilne Marketing Mobile Marketing (Marketing with Kate) over 11 years ago

Good post David. I'm still new to this business and learning a lot. Reading through the other comments was informational as well.

Michael Carter, Realtor

421 SE Main Street, Suite 201

Simpsonville, SC 29681

www.beachboyrealestate.com

Posted by Anonymous over 11 years ago

Political affinity is not mandatory for agreement in this forum, Kate. Neither am I soliciting dollars for RPAC to be distrubuted amongst a partisan venue.

When I consider liquidity two things come into play.

First, it's the ability of a person or a company to retain the ability to convert their assets, their property, their holdings into cash without the inauspicious characterisitic of having endured any loss. Having this type of liquidity usually equates to a good credit rating.

Second, I believe liquidity may be considered some significant feature of a stock holding, some article of commerce, or some formal declaration that serves as a written account of ownership or obligation and is a fact of relevance to finance and investment. The holder has a right to receive interest or dividends from the possession of that investment. Mortgage backed securities will serve for this purpose. Since Ginnie Mae does not trade publicly, and the government has no liability towards the dispensation of dividends to investors, it's inconceivable that publicly traded secondary mortgage entities which engage in the activity of providing goods and services involving the financial aspects of investment strategy would be assimilated. Therein the distinctions reside and the line is drawn.

With the numbers in mind, stocks and market funds are more liquid than real estate because they're easier to move.

I don't tremble convulsively or say 'never again' like some salespeople and brokers do when I'm confronted with negative media reporting. I take the time to investigate and feel vigilant because such reporting is available. When brokers are telling their salespeople at their salesmeetings to ignore the media they're also telling them to ignore the nation and it's concerns about housing.

I'm not a cheerleader for the industry with phony enthusiasm and I love the truth. Some tragically divert it as though it were a challenging mind game. I smile and say "way to go" when fraud is uncovered after the fraud examiners have done their job and the perp shipped away to the slammer, and the victims compensated for their misery and injury, if possible. Many have lost, and are still losing, everything because of despicable and contemptible greed-driven lowlife in the mortgage business working alongside real estate agents, phony buyers with false documentation, bogus appraisals and seedy investors.

I'm doing everything I can to restore confidence in my community, and elsewhere. I say to all real estate professionals "tell the truth", whether or not it's alarming truth representing some dismaying and horryfying fraud perpetrated by industry professionals, or irrefutable positivistic truth substantiating compatibility in opinion and action. 

More than anything else, trust was lost in our industry, and it's the most important and valuable investment of all.

Posted by David Saks ((retired)) over 11 years ago

Thank you, Michael, for your nice comment. Hope your having a fine week, and I wish you much success in the days to come.

Posted by David Saks ((retired)) over 11 years ago

Real Estate Blog or Conspiracy Theory?

 

Posted by Gary Miljour, Mortgage Originator NMLS Licensed in AZ and NC (American Financial Network, Inc. NMLS#207208) over 11 years ago

Both.

Posted by David Saks ((retired)) over 11 years ago

Scary stuff. It is going to be an interesting time to watch what happens.  Only a bit of nail biting every now and then.

 

BTW, I loved the animation in your picture.  How does that work?

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) over 11 years ago

Thanks, Christine. It's getting weird on the hill. Thanks for the compliment on the cursor. It works when you log onto my blog :-)

Posted by David Saks ((retired)) over 11 years ago

Great insight and dialog.  The floating head...I thought my laptop was whacking out.

Posted by Christine O'Shea (Christine E O'Shea Broker-Associate) over 11 years ago

Great insight and dialog.  The floating head...I thought my laptop was whacking out.

Posted by Christine O'Shea (Christine E O'Shea Broker-Associate) over 11 years ago

Thank you, Christine. Nice to hear from you.

Posted by David Saks ((retired)) over 11 years ago

Well I'm not sure there is much of another choice right now.  The GSE's have enjoyed a wierd semi private/semi government status since their creation back in 1930.  The problem is like so many of the other participants in the mortgage market they got greedy levered up, and now are facing the largest corporate failure in US history, which would take down the remaining housing market. 

They've been run more like hedge funds than responsible corporate entities the past 5 years, leveraging themselves up a combined 70x.  Actually that leverage makes any hedge fund or investment bank look pretty sane, and their now sitting on several hundred billion in losses over the next couple years against a regulatory capital base of well under a hundred billion.  And they've been able to do it due to the perceived government guarantee for their debt (implicit not explicit)


What's the options, for two companies that are almost the poster child for corporate irresponsibility and greed, who's failure would demolish the remaining housing market?

Posted by Matt Heaton (Timu Corp - CEO, ActiveRain - Co-founder) over 11 years ago

Great to hear from you, Matt !

Fannie Mae managers were responsible for a bucketload of fraud over a six year period and doctored earnings so their execs could pirate millions of dollars in bonuses. That was just two years ago.

Most people have already forgotten the 400 million dollars in penalties that were levied by the Securities and Exchange Commission regulators just a few months ago.

They didn't exercise proper control. CEO Franklin Raines and Chief Financial Officer J. Timothy Howard, were busted and kicked out.

Ginnie Mae's been dancing with Fannie for some time now.

Freddie has always considered three areas of underwriting, whether traditional or automated, and that includes collateral, credit reputation and the ability to pay back the loan. The automated program Loan Prospector may not have come under the scrutiny of watchful human eyes like it should have. Credit reputation and credit scores weren't concomitant when the underwriters were reviewing loans in many cases over the last few years. Now the fiddler's playing a mournful tune. I agree with you, Matt. Greed was the motive behind the reprehensible acquisitiveness and insatiable desire for wealth. 
 
It was also alleged that two transactions with Goldman Sachs screwed up 100 million bucks and that the books were cooked to hide it.

The companies earnings were misstated by nearly 11 Billion Bucks between 1998 and 2004, and paid out nearly 53 million bucks in bonuses during the same period according to the OFHEO allegations.

Maybe they've been run more like hedgehog funds, Matt ! :-) hedgehog

Any strategy used to offset investment risk never eliminated the possibility of future losses for their investors. Although Ginnie's support of the Tandem Plan gave Fannie a lot of confidence with high-risk, low-yield loans. Quite a cushion. One company controlled by HUD and the other issuing common stock as a quasi-government agency. 

They've always been kissing cousins :-)

Hope your having a great week. Wish I could be with you and all the guys in San Francisco next week. I'd have to find someone to feed Max, my piano playing cat. Hope all is well, Matt !

Posted by David Saks ((retired)) over 11 years ago

...correction...53 million in bonuses.

Posted by David Saks ((retired)) over 11 years ago

Nice picture...haha. Thanks for sharing the insight.

Andy Laughlin

Connect Realty

Posted by Andy Laughlin (ConnectRealty.com) over 11 years ago

Glad you got a nice chuckle from that goofy looking wolf, Andy. Good to hear from you.

Posted by David Saks ((retired)) over 11 years ago

...btw...not a gerbil

Posted by David Saks ((retired)) over 11 years ago

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