Manipulating mortgages

The dust has settled a bit on the Treasury’s recent decision to give Fannie Mae and Freddie Mac a green light to nationalize our mortgage problem. Calculated Risk says the move was not necessarily done on Christmas Eve to escape notice. And it was not done to socialize future losses via Fannie and Freddie. It

The year in review at Credit Writedowns – Crony Capitalism

Before the Christmas break, I wrote a post to tie together my thoughts on why I have found the Obama economic program so unsatisfying despite some obvious success in stabilizing the economy. This first part framed the status quo as an unequal division of spoils that has become more and more unequal due to kleptocracy

Fannie reports $171 billion in non-performing loans

Fannie Mae has the luxury of marking its accounts more accurately because they have no fear of being nationalized or going bust since they already have hit the wall.  So, when we read the latest quarterly results from Fannie Mae, we are not just seeing a glimpse of Fannie’s reckless financing, but of the American

Is the new affordable FHFA loan program predatory lending?

Let’s say you’re an American named Maria living in Southern California.  The year is 2006.  You make $45,000 and your husband David makes another $40,000.  You have two children aged six and four and your two-bedroom apartment is getting too small.  So you decide to consider buying a house.  Eventually, you and your husband find

Can I borrow the full amount and an extra 25% too?

Apparently the answer to this question is yes.  CNBC is reporting that home ‘owners’ who refinance their mortgages through loans backed by Fannie and Freddie will be able to borrow up to 125% of their homes’ value (hat tip Marshall Auerback).  That’s not a typo: we’re talking no-money down and 25% cash back.  Sign me

Fannie Mae: a bottomless pit for U.S. taxpayers

Bloomberg has the goods on Fannie and they’re not good. Fannie’s regulator wants $19 billion from the U.S. government because the firm has negative capital. Fannie Mae had $23.2 billion in losses last quarter alone. And it says losses in 2009 will be worse than 2008.  Nice. Here’s the money quote: “Fannie says it does

Bad behavior in financial services

In case you missed it, Freddie Mac and Fannie Mae have cost taxpayers tens of billions to date. The bill is still rising, however, as the two companies are looking for $50 billion more to avoid technical insolvency.

Then there is Citigroup who has had their hands out for $45 billion. They have also written down over $80 billion in bad assets. Yet, they are still splurging on corporate jets.

The video below reports on these events, on John Thain’s million-dollar office makeover and more. Needless to say, we have a clear case of banks behaving badly

A quick note on corporate bankruptcy and bailouts

Bankruptcy is a necessary part of a free market. I certainly believe this to be so. Rick Newman, who writes the blog “Flow Chart” over at U.S. News, is putting forward the provocative idea that failure is exactly what we needed more of in 2008 and what we should want in

Treasury Considers Plan to Halt Home Price Slide

Marshall here. Slowly but surely, the Treasury is beginning to move more aggressively on providing help to homeowners, as opposed to bankers. This makes sense: A financial meltdown and housing deflation cannot be cured simply by pumping money into the banking system. You also have to consider a program which provides mortgage relief to homeowners as well

Treasury to Consider Further Measures to Halt Housing Slide

The Treasury Department is considering a plan to halt the slide in home prices that would lower mortgage rates using Fannie Mae and Freddie Mac. The plan could reduce rates for newly issued loans to as low as 4.5%. Slowly, but surely, the government is moving in the right direction. It is beginning to dawn on Treasury (albeit, belatedly) that a prerequisite for economic recovery is not just the stabilisation of the banking system, but some sort of program which provides mortgage relief for home owners. This plan is a small start.

I have a problem with this though. It is “trickle down”

More on Fannie and Freddie – Signs of life in the Refi Market?

Below is a chart of variable rate loan applications as per cent of total. This can be looked at from a contrary opinion point of view, that is people are afraid of variable rate loans after they got burned on the upside in the last several years and thus they are moving to fix rate

Why not use Fannie and Freddie?

I don’t understand the lack of imagination in DC. All the politicians have to do is tell the banks to lower their variable rate mortgage loans on the books to 4% right now, today or else and it is like $600-$750 billion of stimulus. With short rates as zero it’s the least the banks can do.

That probably offends the free market sensibilities of many of our readers, so here’s an alternative approach: Why not Fannie and Freddie, which are now de facto arms of the US government