Comments on: Will someone please put Fannie and Freddie out of their misery? http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/ Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: nose2066 http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038323 Fri, 08 May 2015 01:35:58 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038323 From time to time, these sorts of articles appear about Fannie Mae and Freddie Mac, insisting that something must be done. The mortgage market is still functioning. The government is making a large amount of money from the profits that Fannie Mae and Freddie Mac feed into the government.

It’s really those profits that are the current problem. The government botched-up the take-over of Fannie and Freddie during the financial crisis.

The government defacto nationalized the two companies without compensation to the shareholders. The government used the two companies to try to rescue the housing market. In fact, Fannie and Freddie were even used to subsidize parts of the banking system. Bank shareholders were rescued. Fannie and Freddie shareholders were abused. Now Fannie and Freddie have a different, new set of shareholders who bought the stocks more recently at depressed prices.

Those new shareholders claim that the current profits that the company is generating should belong to them. The old shareholders who were there when the companies were defacto nationalized, think that the profits should belong to them. If the two companies were not making any profits, no one would want to claim them.

Meanwhile the government in Washington does not want to officially nationalize Fannie and Freddie since that would add those companies’ trillions of dollars of debt onto America’s national debt.

So the situation continues. Expect more articles like this one in future years, unless the two companies stop making profits.

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By: FinancialFun http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038321 Thu, 07 May 2015 23:44:26 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038321 Makes sense for private investors to get behind mortgage backed securities, but mortgage lenders focus selling to Freddie and Fannie. 3 steps to fixing mortgage industry:
1. If you sell mortgages you must invest in the mortgage securities not just sell them to Freddie/Fannie or other banking institution (Pay attention to online lenders).
2. Raise interest rates or institute a refinance change that requires lender to verify that borrower is actually equitable. (So here we need to be certain that appraisals are required on all refinances, and that lenders can’t refinance a borrower who doesn’t save money and still reduce his debt. Pay attention online lenders who focused on selling FHA streamlines to clients who needed to “skip a payment” to get by.)
3. Get rid of lead aggregators who deceptively target consumers. Anyone see the “Barbara Corcoran’s Brilliant Tip for Paying Off Mortgage” ad? Or how about the “President Obama Changes Lending Law” for HARP?

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By: pyradius http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038317 Thu, 07 May 2015 21:47:41 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038317 LetBalanceCome,

All those minorities failing on all their loans right?

Conclusions
In this paper we examined the effect of affordable housing legislation on the volume, pricing, and performance of securitized subprime mortgages originated in California and Florida in 2004 through 2006. Using a regression discontinuity approach, we find no evidence that the affordable housing goals of the CRA or of the GSEs affected any of these outcome measures. This finding is robust to the inclusion of various, to the sample of only full documentation loans, and to different bandwidths for the regression discontinuity specification. We also find that the majority of mortgages packaged into subprime MBS went to borrowers with high stated income: Average borrower income for such mortgages was about $100,000. While we provide evidence that Fannie Mae and Freddie Mac held substantial amounts of subprime PLMBS, and that their holdings of these securities played a significant role in their demise, the evidence in this paper refutes the claim that the affordable housing mandates were responsible for the subprime crisis. We hope our findings stimulate researchers to seek other explanations for the subprime securities boom.

https://research.stlouisfed.org/wp/2012/ 2012-005.pdf

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By: AlkalineState http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038316 Thu, 07 May 2015 21:32:57 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038316 Hahaha. LetBalanceCome, let’s see you back that up with actual data and information. Clinton? Seriously? I think you’ve been dipping into the AM radio talk-show sauce again :)

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By: LetBalanceCome http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038312 Thu, 07 May 2015 20:54:51 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038312 Clinton and his cronies made mortgage banking a racial vote-buying scheme and caused the 2008 collapse. He should be in PRISON.

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By: AlkalineState http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038311 Thu, 07 May 2015 20:53:00 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038311 Creditors pursuing Moody’s for fraud in multiple cases…

http://www.wsj.com/articles/SB1000142405 2702303914304579192343147508158

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By: AlkalineState http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038310 Thu, 07 May 2015 20:27:23 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038310 The writer is from Moody’s. The same outfit that gave CitiGroup and Bear Stearns a AAA credit rating as they were dissolving. This is an outfit with zero credibility.

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By: pablo222 http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038242 Thu, 07 May 2015 18:33:41 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038242 Mark Zandi attempts to make a possibly valid argument using convoluted facts that don’t support his premise. Fannie and Freddie came about as private lenders were both unable and unwilling to service the private mortgage market. So why would this vacuousness author now believe that there is ample funds available for mortgages in a privatized marketplace? He also states that somehow Fannie and Freddie (I assume continuing to exist) should somehow still make sure money is available to lower income families for mortgages. Of course inherent in this availability is higher risk to a lender that a private lender may not wish to take. A lender can either refuse the loan, ask for a higher interest rate or cost shift a portion of the risk to more secure borrowers (if forced to lend by the Federal govt.)

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By: T.L. http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038241 Thu, 07 May 2015 18:10:39 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038241 He that observeth the wind shall not sow; and he that regardeth the clouds shall not reap.
… and do business with them?

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By: Richard_Davet http://blogs.reuters.com/great-debate/2015/05/06/time-to-fix-u-s-home-mortgage-financing/#comment-1038240 Thu, 07 May 2015 18:10:38 +0000 http://blogs.reuters.com/great-debate/?p=40226#comment-1038240 Fatally flawed with partner/players in the GSE Business Model hopelessly conflicted.

Impossible to fix. Fatal means death.

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