ASG

Historic Financial Collapse Underway?

As I posted in another thread - it simply is not that hard to come up with the facts - and as to Fannie Mae the facts absolutely do not support the ridiculous claims like made here ....

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Why is it that every one of these type stories - that trumpet the dangers of Freddie, Fannie - here the FHA - or even ones like Countrywide and IndyMac etc never bother to talk about teh details

All we hear is how much risk there is - how poorly they are supposedly doing - how likely they are to fail and/or need rescue

Yet - none of these predictions are supported by facts.

The strength of Fannie. Freddie, FHA and even IndyMac and Countrywide are in the underlying assets - the loans themselves.

So just how are these loan portfolios doing?

Even a nominal effort at research yields the broad facts.

Fannie Mae has appx $5 trillion in mortgages - appx 1/2 of all mortgages in the US.

Some are claiming they don't have enough capital - but once again these claims are the result of "fair value" accounting of their assets - which means pricing them at liquidation value - irregardless of the real value

Yet the delinquency rate on the FNMA portfolio - the 90 day late rate - is just 1.15% as of March 2008 ... the foreclosure rate is usually a bit less than half of the delinquency rate

tinyurl.com/FNMA-FC-RA...

So on ALL FNMA Loans almost 99% are not delinquent


FNMA Loan breakdown Q1 2008:

tinyurl.com/FNMA-LoanD...

A tiny fraction of all FNMA loans are subprime - and just over 10% are ALT-A ....

A total of 93% of all new business in Q1 2008 was fixed rate loans - and a total of 89% of all mortgages in their portfolio are fixed rate loans

Estimated average Loan to Value is 62% (38% down payment/equity)

Estimated average FICO score - 721 (generally considered in the very good to excellent range)

Fannie Mae Delinquency Rates Q1 2008 (only appx 50% will actually end up foreclosed):

tinyurl.com/FNMA-Delin...

In Q1 2008 just 1.15% of all loans were 90+ days delinquent - appx 50% of these will end up foreclosures

Majority of delinquencies are in CA, AZ, FL and NV ...

90+ day delinq rates on ALT-A was 2.96% in Q1 200 vs 2.15% in Q1 2007

90+ day delinq rates on Subprime was 7.42% in Q1 200 vs 5.76% in Q1 2007

Many of these higher risk loans were originated in 2007 and prior - with our tightened standards newly acquired loans will have lower credit risk

The delinquency rate overall is just over 1% - just under 99% of all FNMA loans are NOT delinquent - are performing as agreed

Fannie Mae Q1 2008 Foreclosure stats:

tinyurl.com/FNMA-FCsta...

AZ, CA, FL, and NV accounted for 17% of foreclosures in Q1 2008 vs 4% in Q1 2007

The Midwest accounted for 36% of foreclosures in Q1 2008 vs 44% of the foreclosures in Q1 2007

ALT-A loans accounted for 29% of foreclosures in Q1 2008 vs 17% of the foreclosures in Q1 2007

Total foreclosed homes rate was 0.1% of all mortages in Q1 2008 and Q1 2007

Out of ALL Fannie Mae loans 99.9% are not foreclosed on ....

At the end of Q1 2008 Fannie Mae had $2.723 trillion in mortgages on their books and $2.625 trillion in mortgage guarantees on their books - total appx $5.35 trillion .... up from 2007 which saw $2.65 trillion in loans and $2.55 trillion in guarantees for a total of $5.2 trillion

Fannie Mae has $4.53 billion - out of $5.35 trillion in total loans in foreclosed homes on their books a total actual foreclsoure rate of 0.085% of current book

... and they will recover appx 60 - 65% of that $4.53 billion as these properties are sold - leaving a net loss of appx $1.812 billion - or appx 0.034% of the total $5.35 trillion current book

Total "non-accruing&quo.... (delinquent) loans are appx $8.723 billion - which makes the delinquency vs foreclosed rate on the $4.53 billion equal to appx 51.9%

Yep that portfolio is in terrible shape ....

Net interest income for Q1 2008 was $1.69 billion ... net guarntee income Q1 200 8 was $1.752 billion

Total income/loss before taxes was a loss of $5.113 billion for Q1 2008 however $4.377 billion of this was a "paper" mark to market "fair value" accounting loss - and there was another $3.073 billion provision for credit losses in Q1 2008 in this $5.113 billion Q1 loss

The $5.113 billion Q1 2008 loss provided a tax benefit of $2.928 billion - which reduced the net loss to $2.186 billion after taxes

According to one report:

"As of March 31, 2008, Fannie Mae had $42.7 billion in core capital, which represented a $5.1 billion surplus over the requirements of its regulator ... If we add together their statutory surplus, current loss reserve and estimated revenues, total “claims paying resources” for FNM are $56-92 billion ... If we tax effect these numbers, we see that FNM can sustain losses of $85-141 billion over 3-5 years

What is happening is that Fannie and Freddie are required, by accounting rule, to record paper losses because the immediate trading value of the assets on their books -- and in this case assets means mortgage loans that it holds--are going down. It probably has no intention of selling those now, so that is a somewhat theoretical problem. But that's what the accounting rules require, and as a result, it must record a "loss" for those on its quarterly income statement. That loss is then deducted from the value of shareholder equity on its balance sheet, thereby reducing the "capital" it has to serve as a cushion against further losses. That's basically what all the fuss is about."

Total losses in Q1 2008 = $2.186 billion (or which $4.377 billion was a paper mark to market loss which will come back as profit as the financial markets stabilize) ... and total reserves and surplus etc $56-$92 billion ...

Yep - they are in terrible shape all right ....

-steady and increasing revenue

-increasing market share with limited competition
loss reserves sufficient to handle years of losses at
current levels

-billions in unencumbered loans they can borrow
against

-improving loan credit quality on new loans
very small exposure to riskier subprime and ALT-A
loans

-far below "market" delinquency and foreclosure rates

FHA's numbers are even better than Fannie's in most metrics - the loans in their portfolios have some of the lowest default rates of all loans according to MBA's numbers

Yet we constantly hear from "traders" like this one how terrible these institutions are doing - and never with a review of the real details - the status of the assets....

Why is that?

What are all these commentators afraid of?

Historic Financial Collapse Underway?

yet another mindless "sky is falling - the end is near" commentary wholly unsupported by facts

It is clear this author - like most others - asn has been noted by several in this thread - pretty much made up his claims out of thin air - with no basis in fact

as usual with virtually every author these days of similar doom and gloom stories - he offers ZERO factual support for his claims of worthless paper and $1 trillion in losses

Why is it so many people today are sheep - blindly following completely undocumented and un-sourced alarmist comments like this? Why is it so many refuse to take the simple step - before rushing to judgment - of doing the simplest research and looking at the actual financial numbers?

clearly this author like so many others has not bothered ....