Freddie Mac First to the Trough

Let's keep an eye on this because as I mentioned we will be thanking the stars above if we are only on the hook for $200B ($100B each) to Fannie and Freddie. My thought process is these 2 institutions will be the center of a major homeowner bailout that when we look back in 5-7 years will cost potentially a trillion (give or take a couple hundred billion) as we re-do interest rates and mark down principal to save millions of Americans.

Freddie is the first to go to the government, and already is asking for the first $13.8 Billion. $13.8 Billion down, $86.2 Billion to go before they hit their (cough) ceiling of $100 Billion.

• Freddie Mac is asking for an initial injection of $13.8 billion in government aid after posting a massive quarterly loss. The mortgage finance company is making the first request to tap the $200 billion promised by the Treasury Department to keep it and sibling company Fannie Mae afloat after the two were seized by federal regulators more than two months ago. Freddie Mac said it expects to receive the money by Nov. 29.
• The McLean, Va.-based company posted a loss Friday of $25.3 billion, or $19.44 per share, for the third quarter. The loss was mainly due to a $14.3 billion charge to reduce the value of tax assets, but also was driven by $9.1 billion in writedowns on mortgage securities, and $6 billion in credit losses due to soaring mortgage delinquency rates and foreclosures.
• Freddie Mac said that rising unemployment rates, tightening credit and deteriorating economic conditions "contributed to a substantial increase in the number of delinquent loans," including prime loans made to borrowers with strong credit.
• Freddie Mac's overall delinquency rate rose to 1.22 percent, from 0.9 percent at the end of June, and 0.5 percent a year earlier.

• On Monday, Fannie Mae posted $29 billion loss in the third quarter as it took a massive tax-related charge. While Fannie Mae said it may have to tap the government's for help in the coming months, it has not yet done so. (soon enough!)
• Fannie Mae and Freddie Mac, which own or guarantee around half of the $11.5 trillion in U.S. outstanding home loan debt, operate in a conservatorship that enables the government to inject up to $100 billion in each company in exchange for ownership stakes of almost 80 percent.

Comments

[PNG:]

You can thank Rep. Barney Frank for almost single handedly in bankrupting Fanny and Freddie by pushing high risk loans to people who wouldn't normally quailify for a mortage. Now we're suppose ot expect him, Reid and Pelosi to straighten the mess out. What a joke.

Congress needs to get off of the seniority system in giving out committee and leadership assignments and award these positions to people that know what they're doing.

2008 Nov 16 04:40 PM

[houstonian22:]

This is ridiculous! What type of spending controls are in place to ensure that a good part of the $13B is not sub-optimally utilized? What new spending safeguards have been put in place in Freddie (and Fannie)? What transparency is Freddie Mac on point to demonstrate with respect to this funding..?

Or are we going to wait to hear of another AIG type frivilous spending malpractice and then reactively put half-hearted controls in place..

We need to make to make Freddie account for each cent they will consume..this is an organization with a long history of management mess-ups..and there is absolutely no reason to believe Freddie will make efficient use of these funds left to its own designs.

A call to our great country's officials at the helm - "please wake up! " and place some controls - put the onus on Freddie to demonstrate optimal utilization of these funds..please wake up!. Please!

2008 Nov 16 04:50 PM

[James Wilson:]

There are 2 sets of laws here. One was the community reinvestment law that "encrouaged " investment of low interest loans in hard hit communitites with high employment. This was never meant for the Gated Communities.
Another is the NINJA LOANS. Approved by Republcians susppose to help small businesses remodel and sell homes. But what eneded up were forgieners came in got loans, several, then left the country with $100,000's or millions of dollars.
The Ninja Loans are in direct violation of the RICO act. Republicans have blocked changes to the laws they passed on 2002 3 times in the senate.


On Nov 16 04:40 PM PNG wrote:

> You can thank Rep. Barney Frank for almost single handedly in bankrupting
> Fanny and Freddie by pushing high risk loans to people who wouldn't
> normally quailify for a mortage. Now we're suppose ot expect him,
> Reid and Pelosi to straighten the mess out. What a joke.
>
> Congress needs to get off of the seniority system in giving out committee
> and leadership assignments and award these positions to people that
> know what they're doing.

2008 Nov 16 06:49 PM

[SugarDaddy:]

Wonder if Barney and his other co-hearts were about to lose their pensions and/or homes how motivated they would be to reform the corruption and lies they keep perpetuating on us citizens.

2008 Nov 17 12:55 AM

[Kinja Rules:]

No, Just No. If the Powers that Be Can Restructure the loans outstanding for a longer duration, even w/a lower Interest rate. The Govt Wins! The People Win! This isn't brain surgery. You finance X for 7 yrs, the $ comes back in 7 yrs. OK, even if the interest rate is Low...40yrs = 4.4 X's the original investment w/interest.

Don't Buy the Bad Loans! Don't give the Money to the Banks! Just restructure the Loans! The FDIC has the right idea that will work for this problem.

2008 Nov 17 06:50 AM

[ATWshop:]

There is one "Major" flaw that no one seems to recognize here. If the gov is gonna restructure loans to people that are 3 months behind... this will give the next person a HUGE incentive to stop paying their mortgage and then after 3 months go to the bank and get better terms.
Of course to qualify you have to hit the 38% of income rule...which would also give you another incentive to lower you income until you qualify and then increase it once the terms have been reset to your advantage!
Wow... can we be of any more help to the idiots that made the loans and the idiots that took out the loans?

2008 Nov 17 07:05 AM

[NANA:]

Check out the food bank lines. Stop wineing!!We have to do some thing. Looking back and saying shoulda, coulda , is waste of time.We need to keep people in thier HOMES. The system is flawed ,GRANTED. Do any of you think people will down size thier incomes to adjust for this 38%, and three months rule. Come on now !!T The people we are talking about are NOT looking at stock web sights. Look around people. We need to help the USA, and all the tax paying people, people who paid before this mess and now...What does it matter who 's fault it is. When you are living in a box.Or you car. Pay now or pay much more later. We can boot the guilty ones later. AMEN

2008 Nov 17 10:17 AM