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Thread: Fannie and Freddie hope that you loose your house

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    Featured Member Vamp's Avatar
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    Default Fannie and Freddie hope that you loose your house

    The Treasury Department is investigating a report that Freddie Mac, the mortgage giant, bet against homeowners’ ability to refinance their loans even as it was making it more difficult for them to do so, Jay Carney, a White House spokesman, said on Monday.

    The report came just as the Obama administration had been escalating its efforts to push Fannie Mae and Freddie Mac to ease conditions for homeowners, including those who owe more on their mortgages than their homes are worth.

    Last Friday, the Treasury announced that it would offer increased incentives to lenders to forgive portions of homeowner debt, saying pointedly that for the first time the incentives would be offered on loans held by Fannie and Freddie.

    But Fannie and Freddie, which said they would review the increased incentives, have long declined to allow debt reduction on the loans it holds or guarantees, saying that it would create unnecessary losses for taxpayers. The companies, which are financed by taxpayers, have also maintained barriers to refinancing, like risk-based fees for homeowners, even as mortgage interest rates have dropped below 4 percent.

    On Monday, ProPublica and National Public Radio reported that Freddie Mac, which maintained slightly tighter restrictions than Fannie on homeowners’ eligibility to refinance, had a multibillion-dollar investment whose value hinged on borrowers continuing to pay higher interest rates.

    Beginning in 2010, Freddie bought several billion dollars’ worth of “inverse floater” securities — essentially the interest-paying portion of a bundle of mortgages — for its investment portfolio while selling the far less risky principal portion. Fannie and Freddie are supposed to be decreasing the size of their investment portfolios.
    http://www.nytimes.com/2012/01/31/bu...dept.html?_r=1
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    Default Re: Fannie and Freddie hope that you loose your house

    Imagine that.... They loot you from the left..... They loot you front the right.... They loot you from infront..... They loot you from behind.
    The country has been looted.

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    Default Re: Fannie and Freddie hope that you loose your house

    well, Fannie and Freddie received a de-facto mandate to minimize their losses ... while at the same time receiving an 'official' mandate to keep backing mortgages for low income borrowers / inner city borrowers which are statistically much more likely to go into default ... so they decided to 'hedge' against upcoming mortgage defaults / personal bankruptcies via making contrary investments that will rise in value as mortgages / mortgage bonds default . Smart business from the standpoint of actual US taxpayers who must eventually 'cover' these losses !

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    Default Re: Fannie and Freddie hope that you loose your house

    All the more reason to abolish Fannie and Freddie and let the housing market FINALLY crash and then start healing.

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    Default Re: Fannie and Freddie hope that you loose your house

    No lender wants to foreclose. It is time the government quit forcing lenders to make high risk loans, and time to quit bailing out lenders who make them out of greed. There ought to be recourse on the original lender and loan officer for loans that go into default.

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    Default Re: Fannie and Freddie hope that you loose your house

    Quote Originally Posted by slowpoke View Post
    No lender wants to foreclose. It is time the government quit forcing lenders to make high risk loans, and time to quit bailing out lenders who make them out of greed. There ought to be recourse on the original lender and loan officer for loans that go into default.
    I disagree with this whole idea the government is forcing lenders ie banks to process risky loans. There never was a law or regulation that forced banks to lend to extremely risky consumers. There are regulations for race, gender, and serving the whole community, but nothing that says they have to take on greater risk to do it. Banks did it out of greed. They made more money from subprime borrowers then they did prime. It is that simple.

    Now Fannie and Freddie are not banks. Yes they were required to take over subprime mortgages. why? Because after the housing collapse there was a vacuum of subprime securities (the original backers). Without Fannie and Freddie taking on these mortgages it would of been a bigger nightmare for homeowners and investors.

    Loan officers do not write the policy of what is approved or not. The only thing a loan officer does is process the paperwork in accordance to the current policy and guidelines set down by executives. Underwriters are the gate keeper between the executives and the loan officer.

    Trying to regulate default is futile in the big picture. Not everyone's default is the result of a lender being fraudulent. But if you remove the incentives for fraudulent activity it is less likely to happen. Bringing back Glass-Stiegall, in the original form, would be a huge step in this direction.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Fannie and Freddie hope that you loose your house

    Quote Originally Posted by Melonie View Post
    well, Fannie and Freddie received a de-facto mandate to minimize their losses ... while at the same time receiving an 'official' mandate to keep backing mortgages for low income borrowers / inner city borrowers which are statistically much more likely to go into default ... so they decided to 'hedge' against upcoming mortgage defaults / personal bankruptcies via making contrary investments that will rise in value as mortgages / mortgage bonds default . Smart business from the standpoint of actual US taxpayers who must eventually 'cover' these losses !
    From the article ...

    But Fannie and Freddie, which said they would review the increased incentives, have long declined to allow debt reduction on the loans it holds or guarantees, saying that it would create unnecessary losses for taxpayers.

    Beginning in 2010, Freddie bought several billion dollars’ worth of “inverse floater” securities — essentially the interest-paying portion of a bundle of mortgages — for its investment portfolio while selling the far less risky principal portion. Fannie and Freddie are supposed to be decreasing the size of their investment portfolios.

    There is no evidence that Freddie tailored its refinancing standards to its investing strategy, but “inverse floaters” make less money if the loans they cover refinance to a lower interest rate.
    This is where the conflict of interest lays. They could could allow debit reduction, invest in the fact it will happen, which makes a profit that would hedge against these defaults. But instead they are doing the complete opposite.

    As long as there is conflict of interests, lenders will want people to default. They make more money off of it coming and going. It is no different then manipulating the stock market, in this case it is the housing market.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Fannie and Freddie hope that you loose your house

    The banks..... The Pols..... The Fed..... Everyone likes a bull market...... And no one wants to take the punchbowl away....... Securitization as well as greed were huge factors..... Fannie & Freddie were never going to be allowed to fail, and not pay off it's bondholders, especially their foreign bondholders.

    These days, in this country, we socialize losses...... And that is the lesson the looters have learned...... Anyone get charged in the MF Global dabacle yet?
    The country has been looted.

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    Default Re: Fannie and Freddie hope that you loose your house

    Quote Originally Posted by Vamp View Post
    From the article ...



    This is where the conflict of interest lays. They could could allow debit reduction, invest in the fact it will happen, which makes a profit that would hedge against these defaults. But instead they are doing the complete opposite.

    As long as there is conflict of interests, lenders will want people to default. They make more money off of it coming and going. It is no different then manipulating the stock market, in this case it is the housing market.
    I'd love for MF Global to explain how $1.5 billion in CLIENT money just "disappeared". Only an idiot doubts that they glommed it to cover their own trading losses on European debt.

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