whtamess

Welcome to the Mortgage Business

Call me crazy but this whole thing scares the b-jesus out of me.
Here are the facts that I know, well I guess I think I know them based on media representation; Fannie Mae met all of the requirements that were set for them and the regulators released them several months ago. This was after arduous audits and reviews. Freddie on the other hand did not and has demonstrated its inability to pass any of the stress tests. So with that we have one GSE that was in good shape and one that was not. Does this mean that you take them both down? I did however read that they were both currently profitable.
Here is one article I am talking about: Fannie, Freddie Mortgage Profit Reaches 10-Year High
Bloomberg (08/27/08); Shenn, Jody
Citigroup Inc. reports a yield of approximately 40 basis points on current-coupon mortgage bonds bought by Fannie Mae and Freddie Mac, surpassing the amount they pay to borrow by unloading benchmark bonds. Net interest income recorded by Fannie Mae surged to $2.1 billion in the second quarter from $1.7 billion in the first quarter, according to Credit Suisse Group, with investment profits rising to 100 basis points from 82 basis points. Meanwhile, Freddie Mac posted a 92-percent jump in net interest income to $1.5 billion, with investment profits increasing to 80 basis points from 48 basis points. According to Loomis Sayles & Co. Vice Chairman Dan Fuss, "They, at the increment, are very, very profitable. If they can continue to do anything close to business as usual, they are immensely profitable.

This gets very confusing for the average Joe like me. You read this and then you see the action taken. What concerns me as well is the government now in essence having ownership of a huge piece of the mortgage market (yes I know they are calling this a conservatorship) is this really one step in a socialistic form of government? Things like eminent domain come to mind. Maybe a crazy thought but you know crazier things have happened lately.

Why was Fannie Mae included in this debacle when they clearly met all of the requirements? I'm just really trying to understand this. To repeat myself I get the whole Freddie Mac piece. There are just too many actions here that make me wonder out loud. Is this another George Bush "Weapons of Mass Destruction" ploy to get the government involved in something they shouldn't be? These are simply questions that have started to cross my mind. I am completely open to comments that help educate me because as it stands and from what I read from the onset of this issue up and until today all I can get is “beware” this is just the beginning of yet another government intervention going to go wrong. Thank you for any insight you might care to share.