San Diego Housing Bubble News and Analysis

Does this mean that if you didn't sell these two stock by the end of today, you are SOL? Or the government is going to do a take over offering you market price...which hopefully is still zero dollar!

I smell the dollar getting a little smack outta this. Ouch. Thanks uncle sam. We're saved.
I guess we can count on the printing machine to get us back into inflation. But I think it's going to just buy us stagflation. Devaluing the US$, while the economy just sits there. Like a deer inthe headlights.

We are all homeowners now! YAY!!

A recent study from the Congressional Budget Office (CBO) has zero credibility. It pegged likely taxpayer losses in the Fannie Mae and Freddie Mac bailouts at $25 billion. For those with a sense of history, it is worth remembering that the S&L bailout had a $160 billion price tag. The numbers diverge so far from reality as to be laugh-out-loud funny. Funny, that is, except that the CBO estimate demonstrates a willful disconnect with the actual consequences of federal government actions.

As demonstrated below, the real cost of the bailouts will easily exceed $1.3 trillion. In fact, the real cost is likely to range between $1.3 trillion to $1.6 trillion, and is not unlikely to reach $2.5 trillion.

http://www.dailyreckoning.com.au/fannie-...

Let's not forget those pesky Ruskies..

"Russia says further cuts Freddie, Fannie holding"

"SOCHI, Russia, Sept 5 (Reuters) - Russia has slightly further reduced its holdings of U.S. mortgage agencies Freddie Mac (FRE.N: Quote, Profile, Research) and Fannie Mae (FNM.N: Quote, Profile, Research), central bank's first deputy chairman Alexei Ulyukayev said on Friday.

At the start of the year Russia held $100 billion -- or over one sixth of its gold and forex reserves -- in Fannie Mae,
Freddie Mac and Federal Home Loan Banks.
In the summer, officials said that the holdings had been reduced by around 40 percent through not replacing maturing paper.

Nice timing on the sale of FNM, flu. Holy mackeral.

The NY Times just reported that Fannie and Freddie are headed to conservatorship.

http://biz.yahoo.com/ap/080905/mortgage_...

After hours stock is tanking to the tune of 25%

The deal looks done, we should see it plastered all over the media in the next few days. It hard to believe that 9% of all mortgages are behind.

Fasten your seatbelts, things are going to get a little bumpy.

http://online.wsj.com/article/SB12206465...

this story is three minutes old, the cat is beginning to emerge from the proverbial bag.

When China speaks....

From Aug. 22 (bloomberg) A failure of U.S. mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system, said Yu Yongding, a former adviser to China's central bank.

``If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,'' Yu said in e-mailed answers to questions yesterday. ``If it is not the end of the world, it is the end of the current international financial system.'

Not a bailout... conservatorship and likely run down. This will destroy what's left of the lending bubble and only traditional loans will be offered through FHA....

WHAT'S THIS GOING TO DO TO HOME PRICES!!!!

BAWAAAAAAAAA!

Here's more of the rumors

http://www.msnbc.msn.com/id/26567533

It will probably happen Sunday like Bear Sterns.

China will not be happy and may do something as drastic as dumping some of their US bonds, but as US spending declines and their economy tanks as well, they need us to keep buying their imports.

What a joke though. Lend as much money as you possibly can with no regard to the capacity of being paid back and tax payers, against our will and all better judgement, will bail you out.

this is a disgrace!

I'm hoping all the shareholders get totally wiped out. My concern is that these greedy imbeciel investors will get something on the taxpayers dime.

China can dump but they own 1+ trillion in agencies and a conservatorship makes the US Gov't owner of the Treasuries. With how levered the China Central Bank is I believe the US Treasury may have them by the balls... hopefully no Chinese threats were made to prompt this or the Treasury may squeeze.

Bloomberg:

Analysts have speculated that the Treasury would wipe out common shareholders, while seeking to shield preferred stockowners from total loss. Fannie and Freddie preferred shares are typically owned by banks and insurance companies. Their $5.2 trillion of debt outstanding is held by investors including Asian central banks, and would probably be guaranteed, analysts said.

``Treasury's main concern is the debt markets, and if it was to say that it will do whatever is necessary to keep Fannie and Freddie running, the better it is for their funding,'' said Alex Pollock, fellow at the American Enterprise Institute in Washington and former president of the Chicago Federal Home Loan Bank.

http://www.bloomberg.com/apps/news?pid=2...
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One of the goals of bailout is to protect largest holders: Japanese and Chinese investors.

We're on a 10 step program to complete socialism. These events are un-constitutional. The fore-fathers are turning in their graves. This is only the beginning. Good bye America, it was nice knowing you.

This is the definition of moral hazard. What irresponsible, unethical, and greedy industry will my tax dollars go to next? Probably the autos or airlines.

We can just sell China a state. How about Florida? Heck they can't even figure out how to vote correctly with the hanging chaffs. (sp) It's like the game of monopoly. You land on Boardwalk with a hotel that belongs to someone else. You offer to give the other player the $200 after you pass "go" and surrender Baltic to the owner of Boardway.

This really isn't funny anymore. Our poor children. Canada anyone?

Lets see the details of the deal before we move to Canada. That FHA fb bailout turned out to be fairly shrewd, it almost amounts to loan sharking. They may just impress us and set up an eventual profit making enterprise, these companies were profitable for a long time and in the end may have a monopoly. It also might kick the one leg left in the housing bubble out from under itself, causing the air to come out rapidly. Who am I kidding, this will probably be a disaster.

One item that has me curious, the after hours stock prices were tanking yesterday, this morning they have recovered the entire loss and are up from Friday's pre anouncement close. There's something more to this story.

TG, stocks don't trade on weekends AH. If you're looking at the aftermarket quotes at yahoo, more then likely it's yahoo's glitchyness in reporting AH values. It's happened in the past.

the stock is down 20% in AH Fri, 4.04
FLU is right, no trading on the weekends. If the govt. officially announces the takeover Monday morning then it's over anyway.

The US govt is in no uncertain terms, a debtor organization. It needs new money on a constant basis for survival. Thus, evey action it takes must consider how it's lenders will percieve its future stability and worthiness. You can bet that the Asian lenders, that's most of who buys US debt, will be kept whole on anything that's done by the govt. If the Asian countries decided that the US is no longer worthy, we're in huge trouble. They're basically divesting now anyway.

I have to believe that they will convert more of their debt paper in to dollars and then buy US natural resource companies. They want and need this stuff for their future anyway.They have to spend US$ to avoid increasing value of their own currency. And now US debt is getting to a level where servicing it will come into question and that's the first critical step to insovency.

With the government completely behind the "double F..." now, the next bankruptcy risks will fall on the government itself....but wait, that means you and me.

This government is going to drag us to bankruptcy with them. Everyone is going to share the pain that were done by irresponsible tops and bottoms.

The crowd here ending up missing the irresponsible rides but now will join in to pay the price.

U.S. Nears Rescue Plan For Fannie And Freddie:
http://www.washingtonpost.com/wp-dyn/con...

"The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives and prop them up financially, federal officials told the two companies yesterday, according to three sources familiar with the conversations."

"The value of the companies' common stock would be diluted but not wiped out, while the holdings of other securities, including company debt and preferred shares might be protected by the government."

John

So what then do they do with all the homes they'll inherit as foreclosures continue to set records?

Remember that the Alt-A wave has just gotten started. They will likely try to make more mortgage relief but what's on the books was already under threat of firesale prior to the Gov't stepping in. That's probably still very likely.

I have to congratulate everyone here on piggington.......Because you will now all be homeowners whether you like it or not......you're hard earned tax dollars are now going to go directly to those FAE/FNM bondholders overseas.

FLU I agree with you that it does indeed suck but really is not anything that is unexpected. We discussed these sorts of events in the past because we all knew that deep down, the government has/had no other choice. It is kind of like that inevitable prostrate exam, that men have to get when they reach a certain age. You dread it, you do everything to avoid it but at some point... well you know the rest of the story.

Seriously we talked about a conservatorship or some equivalent of the trust resolution entity of the 90's... which is what this really is and well... so now it has happened. I agree with everything you said, it is really disgraceful and well... I guess we need to think about the next logical step.

What concerns me now is how the next wave of foreclosures will indeed be dealt with. My biggest fear is for a possible substantial socialization of these distressed homeowners. I don't doubt for a minute that we could see loan adjustments that will be backed by the government perhaps in the form of massive writedowns in addition to fixed low interest rates. Of course the new loans would be FHA insured as well.

So no, we will not be homeowners like you said... I think of it as we will be more live benevolent philanthropists... except that we will not even be able to deduct the expense.

You are right though as they will pack our dollars in big crates and send them back east...

It is pretty sad.

In response to Temeculaguy

I am guessing there was a leak before market closed on Friday that something was about to happen. I suspect that shorts covered en masse because they didn't know what was going on. Once the details of this disaster is digested, I suspect that the markets will NOT be happy in the long run (but then what do I know). On the other hand, there may be a huge relief rally. Will know more when Paulson talks today, but right now it looks like both the common and preferred shares will be wiped out (as they should). If that happens, there will be even more pain for bank stocks as many own a lot of these. We shall see...

Mercedes, I know enough about the market to know that I know nothing. Your theory is probably right, those that got the leak dumped it after hours on friday. flu and others were right about what appeared to be a bump the next morning, I had looked at the yahoo after hours quote on Saturday morning and it had changed from Friday night so it may just be a glitch since they don't trade after hours beyond Friday night.

I just read Paulson's speach and I am still trying to translate it and get the sugar coating off of it, either way, things are a changing.

It's a little surreal to see Freddie Mac and Fannie Mae on the imploded lenders list.

Will Freasuries trend towards Friday's Treasury rates or Friday's FNM/FRE rates?

HereWeGo

Remains to be seen what treasuries will do. Early concensus is the Bond market will not like this - sending bonds lower and yields higher...meaning - you guessed it - higher interest rates. Won't help housing much if that happens. BUT, there is so much speculation out there. IF (and that is a big if) this bailout restores some confidence in the US banking system, then the cost of borrowing money here and abroad may ease a little. Right now the spreads are ridiculous for US banks and we are seeing that in mortgage rates. It is hard for me to believe after the world digests the fact that these two companies have been insolvent for some time and we are just now realizing it, that it will boost confidence. Holding losses on the books for 2 years? Have to wonder how many other banks are insolvent right now with this creative accounting. I also wonder how Japan is viewing our current state - perhaps some deju vu moments for them? Do you think they will be rushing to buy our bonds or equities after what they went through. China has already taken a huge hit on the value of the US treasuries and MBS they hold (and they hold a lot ~ 1 trillion or so). Do you think they will be rushing head long in the future to buy more? The US had to step in and take control and hopefully restore some confidence in
the US banking system - they had no choice (Frannie and Freddie were insolvent), but there will be fallout. How it all ends remains to be seen.

I just know I won't be rushing out to buy a house anytime soon. We have a long way to go to get out of this mess. I find it amusing to hear people so anxious to buy, like they are going to miss the bottom and prices will suddenly start spiking again. That is not going to happen. What we saw was an illusion created by "artificial" demand that will not return. People who never should have qualified for a home did. Further we had a ton of speculators, buying and selling multiple homes in their quest for an easy dollar. You know there is something wrong when we have TV shows about flipping houses for a profit. Those people are out of the market now for a long time. Those that went into forclosure are going to have a hard time buying again for many years, even if they have stable income and can manange to come up with a 20% down payment due to their damaged credit. Anyone old enough to remember the late '80s know that something similiar happened then. After the decline it took ~ 8-9 years for home prices to start increasing. But that was nothing like we have seen this time around. I suspect it will be a decade or more before we see home appreciation of any kind again - hell we haven't yet stopped dropping.

I pretty much see things the same way, mercedes. I'd just add that builders clearly ramped up aggressively to meet speculative demand, and housing construction has a certain inertia to it, so it takes time to ramp back down again.

Actually, that applies to commercial real estate as well. It's so strange to see new buildings go up and sit empty, but that's the nature of the beast it seems.

...and it doesn't matter who you vote for, they're all the same. Obama, McCain, Democratic Party, Republican Party, blah, blah, blah. Almost all of our politicians suck. Too bad Ron Paul is only one man.

http://latimesblogs.latimes.com/laland/2...