Talks between the President and Treasury Sec. Paulson this morning covered the possibility of the nationaliaztion of the GSE's. If that happens mortgage loans will all but STOP. Mortgage rates will rise to 10%+. Lenders will have no place to sell the mortgages. Housing will further sink and your homes value will fall at least another 30%.
The below is a quote from CNN Money.
"Immediately after the markets opened, shares of Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) fell more than 47% from their already battered closing price the day before. They soon rebounded later in the morning but Fannie shares were still down about 28% and Freddie shares were off 24% in early afternoon trading."
What the govt would do is hold them in receivership. We really don't want that to happen. The GSE's have sold MBS (sorry that is industry lingo people might not know) =Mortgage Backed Securites) to the tune of 5.4 Trillion. Say again Trillion. Do we really want the govt. on the hook for associated losses that could occur on a book of assets up to 5.4 Trillion dollars. NOT!
And Fannie and Freddie currently need 75 Billion in captial to cover proposed reserve requirements. They have 1.4 Trillion in offsheet assets.
What the govt would do is hold them in receivership. We really don't want that to happen. The GSE's have sold MBS (sorry that is industry lingo people might not know) =Mortgage Backed Securites) to the tune of 5.4 Trillion. Say again Trillion. Do we really want the govt. on the hook for associated losses that could occur on a book of assets up to 5.4 Trillion dollars. NOT!
And Fannie and Freddie currently need 75 Billion in captial to cover proposed reserve requirements. They have 1.4 Trillion in offsheet assets.
It is clearly very serious. and NO I dont want the government to back it.
here is the problem. the government CAUSED it with creating law that REQUIRED lending money to people who really didnt have the ability to PAY the loan back in the first place.
now on the back end, we are stuck.
__________________ If I do something stupid blame the Lortab!
It is clearly very serious. and NO I dont want the government to back it.
here is the problem. the government CAUSED it with creating law that REQUIRED lending money to people who really didnt have the ability to PAY the loan back in the first place.
now on the back end, we are stuck.
Exactly. HUD rules instituted during the 90's (and WHO was president then? Mmmm?) effectively created a quota system where people who should never have received a home loan, suddenly got one. Of course this was the beginning of the housing bubble because home sales started taking off for the short term, thus over inflating prices until we are where we are now. And once the sales/appreciation entered its full swing, the banks themselves took it from there as they tried to capitalize on an easy short term buck, not realizing it would HAVE to end soon.
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