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Archive for the ‘Fannie Mae’ Category

Aw, Boehner has his panties in a wad!

House Speaker John Boehner said he and fellow House Republicans oppose Senate legislation to extend through February a payroll tax cut and long-term unemployment benefits and will push to continue the measures through 2012.

Congress should “stop, do our work and extend for one year,” Boehner said on NBC’s “Meet the Press” today. He said a two-month addition creates uncertainty for employers as they budget for 2012. A “reasonable, responsible” compromise could be reached, he said, and suggested a formal conference committee between the House and the Senate to resolve differences between the two chambers.

What work is that John?

In all sobriety, you do realize how The Senate proposes to pay for this tax reduction, right?  They have added to Fannie and Freddie a fee increase.  That’s right — those very “middle class tax cuts” will be paid for by people  in the middle class who buy or refinance houses.  See, the rich don’t buy small houses, they tend to buy big houses — ones that don’t qualify for Fannie and Freddie financing.  And the poor don’t buy houses at all.

So this little game amounts to nothing more than sticking of the hand in one pocket and moving a $20 to the other.  Wow man, you got a tax cut!  (Just so long as you don’t notice that we robbed you of the same money at the same time!)

It’s worse, of course.  The Fannie and Freddie surcharge doesn’t sunset when the tax does.  In fact, it doesn’t sunset at all.  So in addition to taxing you to give it back (a worthless exercise) The Senate is further cementing these two broken GSEs into the Federal Government policy system and is creating a forward slush fund that I’m sure they’ll find some use for down the road.

Isn’t that special?  I knew you’d like it.

For me, the most significant development from the Fed’s announcement is a change in policy where the Fed will re-invest proceeds of maturing MBS securities in new issues of Agency MBS paper. Prior to today, the Fed re-invested principal repayments in Treasury bonds.

I wrote about the possibility of a mega mortgage ReFi by Fannie and Freddie (here and here). I (and many readers) pointed to an obvious flaw in the ReFi story. If a Trillion or so of mortgages were rapidly prepaid, then who would buy all of the new (much lower coupon) mortgage paper?

Now we have the answer. The Fed will put the new MBS paper back on its Balance Sheet, $ for $. There will still be many bondholders outside of the Fed who will get prepaid much faster than they had assumed. Most of that is in pension/bond funds. No one cares about them.

I think that Treasury will announce the plans for a Mega Refi in the not too distant future. It could come this weekend or next week. Obama will wait just enough time after the complex Fed decision so that 99% of all people don’t connect these two dots.

In that 1% will be Republicans. They are going to be mad as hens tonight that Bernanke ignored their last minute plea not to play more monetary games. The authors of that letter, McConnell, Boehner, Kyle and Cantor are really going to be peeved. Not only did the Fed step further on the gas, they greased the skids for an Administration’s plan to ReFi mortgages.

It’s not at all clear that the Fed’s latest move are going to accomplish a thing. I’m not sure that the Big ReFi is going to be such a success either. But that doesn’t matter.

What’s important about this is that the Republicans will respond. They will not give Obama another leg up with his one-year stimulus program. Any chance of that went up in smoke with the Fed’s VERY political decision on MBS today. Can you say, “Collusion”?

This is a real circus now. In this one the bears aren’t dancing. They’re fighting. The claws are out and it’s going to get bloody.

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The banking gears of housing – Bank of America sells mortgage servicing rights on large loan pool to Fannie Mae.  400,000 loans shifted to Fannie Mae with $73 billion in unpaid principal.

Things just seem to get more perplexing with the housing market.  Back in August the Wall Street Journal discussed a deal between Fannie Mae and Bank of America.  The deal is odd even for the current banking system we have in place.  It was reported that Fannie Mae purchased the servicing rights to 400,000 loans for the grand total of $500 million.  Why would this be an issue you may ask?  Well first, Fannie Mae being a GSE does not specifically service mortgages so buying a pool of loans with unpaid principal of $73 billion seems out of place.  It also makes you wonder why a bank that has faced some troubles during the financial crisis would unload so many loans back to the government.  This concern clearly does not go unnoticed and a Representative from the housing battered state of California sent a letter to the Federal Housing Finance Agency (FHFA) asking for more details on the deal.

The letter from Representative Darrell Issa

Source:  Oversight Committee

In the letter, it is noted that the bank decided to sell the portfolio for a loss because the value of the loans were expected to deteriorate even further:

“The loans have a 13% delinquency rate, and more than half of the loans are in troubled U.S. real estate markets.”

Is this another form of bailout going on here?  Why would the bank sell such a large loan portfolio back to Fannie Mae which is now under conservatorship?  The pool of mortgages are already showing an unusually high default rate.  The housing market is unlikely to bounce back soon and to the contrary, is already showing signs of a further correction ahead.

Read the rest at My Budget 360

From CNN Money:

Taxpayer-owned Fannie Mae just bought the servicing rights to a bunch of bad loans from the struggling Bank of America. Where does it end?

By Abigail Field, contributor

FORTUNE — Taxpayers may not realize it, but they just bailed out Bank of America again, this time to the tune of more than a half billion dollars.

The Charlotte, NC-based bank was one of the biggest recipients of bailout funds during the financial crisis. But Bank of America (BAC) continues to face deep problems related to its troubled mortgage portfolio and investors have battered the stock, which has plunged over 40% so far this year. That’s escalated concerns that the bank may need to raise more capital. Yves Smith at Naked Capitalism has even started a BofA death watch.

But apparently the federal government is determined to resurrect BofA: the Wall Street Journal reports the feds have just used Fannie Mae, which is controlled by the U.S. government, to infuse BofA with $500 million and ease one of the bank’s biggest headaches.

Yesterday afternoon on CNBC, Bank of America CEO Brian Moynihan mentioned that five of BofA’s six businesses were making money. The one black spot was its massive portfolio of problematic mortgages and the liabilities flowing from it. Moynihan also mentioned that BofA had just sold some “mortgage servicing rights” as part of its balance sheet strengthening efforts, but he didn’t elaborate.

According to the WSJ, Fannie Mae spent $500 million to buy the servicing rights to a big chunk of the “seven million loans still causing the most problems.” Although the $500 million is a paper loss to BofA, in that the rights were “originally worth more,” it looks like BofA is still getting a good deal because the portfolio’s “value is expected to deteriorate further.”

In fact, the deal is worth much more than $500 million to BofA, because getting rid of those servicing rights lifts a huge cost burden off BofA’s shoulders. And if securitized loans are involved, which they most likely are, the sale also limits the BofA’s potential liability to investors for its current servicing violations. Finally, the $500 million is surely more than the servicing rights are worth in an arms-length transaction. How do we know? Beyond the comment that the loans are expected to “deteriorate further,” the goal of the intervention can only be to fix Bank of America’s capital structure, which is easier for the government to do if it overpays for the rights.

In short, purchasing these servicing rights was another Troubled Asset Relief Program.

Read the rest.

I’m sure this has nothing to do with their stock chart looking like this…and that they might be having capital raising issues.

Do you know where YOUR deposits are?

Just so all of you are clear:  Bank of America just got over $500 Million in taxpayer money, but in just a few days, the “Supercommittee” of Congress is going to convene so it can raise your taxes and cut inconsequential things like Social Security, Medicare and Unemployment benefits.  No, no.  We can’t afford those.  We can only afford to keep giving money to the insolvent banking institutions so they can also keep handing out money to bankroll political campaigns.  YOU ARE MEANINGLESS!

ARE YOU GETTING THE PICTURE YET?  Now maybe you can understand what has been going on in London.

Oh boy, and then the taxpayers – that’s you and I – bailed out both firms, and in fact we continue to right now, with Geithner, under Obama’s direction, continuing to pour in the cash.

The first sign of what would ultimately become a $3 billion fraud surfaced Jan. 11, 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else.

But did Fannie tell anyone, like, for instance, The FBI?

Nope.

Fannie Mae officials never reported the fraud to law enforcement or anyone outside the company. Internal memos, court papers, and public testimony show it sought only to rid itself of liabilities and cut ties with a mortgage firm selling loans “that had no value,” as Smith, the former vice president of Fannie Mae’s single family operations, said in a 2008 deposition.

Just dump it off on someone else, right?  And who else?  Well, that would be the other GSE, who they also didn’t tell….

Taylor Bean would have collapsed in 2002 “but for the fraud scheme,” according to prosecutors. It also survived because Freddie Mac began picking up the company’s business within a week of Fannie Mae’s cutoff, Jason Moore, Taylor Bean’s former chief operating officer, said in an interview.

Isn’t that nice?

Oh yeah, and this little charade factored into the Colonial Bank collapse too.

But all of it would have ended immediately had the government’s sponsored enterprises done what they had an obligation to do – turn over evidence of criminal lawbreaking to the authorities.

They did not and as a result serious financial harm was done – and now we, as taxpayers, get to pay for it.

Oh, and both Fannie and Freddie?  They’re still in business, now 80% owned by Treasury.  That’s you and I, who were bent over the table not just once, not twice, but each and every day this crap is allowed to continue and these firms are not shut down and the parties responsible for this intentional malfeasance remain free without prosecution.

Incidentally, Geithner and Obama, by supporting these firms, are both personally responsible for this crap continuing, and you, the taxpayer, being repeatedly screwed.

The Market-Ticker