[TheBreeze]

As far as I can tell, our system of home financing is the biggest govt wealth redistribution system in the world, taking wealth from savers and giving it to people who borrow to buy homes, in truly mind-boggling amounts.

I totally agree with you PC. Most of the investors are so far removed from what they are actually investing in that they have no idea what is about to hit them. The mortgage on this Solana Beach condo is probably packaged into some AAA-rated CDO that was purchased by a bond fund. The bond fund manager is using money from some private investor who is probably close to retirement and has been told that bonds are ‘safer’ than stocks. The private investor has no idea that he has really bought a mortgage backed up by an asset that is probably as risky as Internet stocks were during the bubble.

Over the next 10 years, I think we’re going to see a lot of would-be retirees who are shocked at how much their retirement funds have shrunk. Some of them won’t ever be able to retire because of this. Meanwhile, the condo speculator on the front-end will get off with just a minor hit to their credit score.

At least the Internet-stock buyers knew they were taking some risks. The bond investors have no idea what they are in for.

[TheBreeze]

As far as I can tell, our system of home financing is the biggest govt wealth redistribution system in the world, taking wealth from savers and giving it to people who borrow to buy homes, in truly mind-boggling amounts.

I totally agree with you PC. Most of the investors are so far removed from what they are actually investing in that they have no idea what is about to hit them. The mortgage on this Solana Beach condo is probably packaged into some AAA-rated CDO that was purchased by a bond fund. The bond fund manager is using money from some private investor who is probably close to retirement and has been told that bonds are ‘safer’ than stocks. The private investor has no idea that he has really bought a mortgage backed up by an asset that is probably as risky as Internet stocks were during the bubble.

Over the next 10 years, I think we’re going to see a lot of would-be retirees who are shocked at how much their retirement funds have shrunk. Some of them won’t ever be able to retire because of this. Meanwhile, the condo speculator on the front-end will get off with just a minor hit to their credit score.

At least the Internet-stock buyers knew they were taking some risks. The bond investors have no idea what they are in for.

[TheBreeze]

As far as I can tell, our system of home financing is the biggest govt wealth redistribution system in the world, taking wealth from savers and giving it to people who borrow to buy homes, in truly mind-boggling amounts.

I totally agree with you PC. Most of the investors are so far removed from what they are actually investing in that they have no idea what is about to hit them. The mortgage on this Solana Beach condo is probably packaged into some AAA-rated CDO that was purchased by a bond fund. The bond fund manager is using money from some private investor who is probably close to retirement and has been told that bonds are ‘safer’ than stocks. The private investor has no idea that he has really bought a mortgage backed up by an asset that is probably as risky as Internet stocks were during the bubble.

Over the next 10 years, I think we’re going to see a lot of would-be retirees who are shocked at how much their retirement funds have shrunk. Some of them won’t ever be able to retire because of this. Meanwhile, the condo speculator on the front-end will get off with just a minor hit to their credit score.

At least the Internet-stock buyers knew they were taking some risks. The bond investors have no idea what they are in for.

[TheBreeze]

As far as I can tell, our system of home financing is the biggest govt wealth redistribution system in the world, taking wealth from savers and giving it to people who borrow to buy homes, in truly mind-boggling amounts.

I totally agree with you PC. Most of the investors are so far removed from what they are actually investing in that they have no idea what is about to hit them. The mortgage on this Solana Beach condo is probably packaged into some AAA-rated CDO that was purchased by a bond fund. The bond fund manager is using money from some private investor who is probably close to retirement and has been told that bonds are ‘safer’ than stocks. The private investor has no idea that he has really bought a mortgage backed up by an asset that is probably as risky as Internet stocks were during the bubble.

Over the next 10 years, I think we’re going to see a lot of would-be retirees who are shocked at how much their retirement funds have shrunk. Some of them won’t ever be able to retire because of this. Meanwhile, the condo speculator on the front-end will get off with just a minor hit to their credit score.

At least the Internet-stock buyers knew they were taking some risks. The bond investors have no idea what they are in for.

[TheBreeze]

As far as I can tell, our system of home financing is the biggest govt wealth redistribution system in the world, taking wealth from savers and giving it to people who borrow to buy homes, in truly mind-boggling amounts.

I totally agree with you PC. Most of the investors are so far removed from what they are actually investing in that they have no idea what is about to hit them. The mortgage on this Solana Beach condo is probably packaged into some AAA-rated CDO that was purchased by a bond fund. The bond fund manager is using money from some private investor who is probably close to retirement and has been told that bonds are ‘safer’ than stocks. The private investor has no idea that he has really bought a mortgage backed up by an asset that is probably as risky as Internet stocks were during the bubble.

Over the next 10 years, I think we’re going to see a lot of would-be retirees who are shocked at how much their retirement funds have shrunk. Some of them won’t ever be able to retire because of this. Meanwhile, the condo speculator on the front-end will get off with just a minor hit to their credit score.

At least the Internet-stock buyers knew they were taking some risks. The bond investors have no idea what they are in for.

[TheBreeze]

I’m not too concerned about raising the conforming limit for Fannie and Freddie. These are still private enterprises, and they have pretty good incentives not to guarantee junk loans. They’re trying to make a buck first, and appease the politicians second. Sure, if they fail, we’re on the hook for their losses, but I bet they won’t fail.

I bet you’re wrong. According to their latest 10-Q (filed last November), Fannie has guaranteed $2 trillion in mortgages and owns $700 billion. All this on $44 billion in capital. Does this look like a sound balance sheet to you?

The only incentive the Fannie and Freddie CEOs have are to make short-term results look good through the fees generated by mortgage originations. They have virtually no incentive to look at the long-term likelihood of payback on these loans as that won’t affect their bonuses for the next quarter.

My guess is that if the Fannie and Freddie mortgage portfolios were marked to market, they would both be insolvent.

Here’s a link to Fannie’s latest 10-Q.

http://www.sec.gov/Archives/edgar/data/310522/000095013307004526/w40673e10vq.htm

Search for “MBS held by third parties” on that page to see how bad it is. In that little section you can see how enormous their mortgage book of business is and how little capital they have. These guys are goners without additional captial infusions.

I’d give you a link to Freddie Mac’s latest quarterly filing, but I can’t find any:

http://www.sec.gov/cgi-bin/browse-edgar?company=&CIK=fre&filenum=&State=&SIC=&owner=include&action=getcompany

Who knows how bad their situation is.

[TheBreeze]

I’m not too concerned about raising the conforming limit for Fannie and Freddie. These are still private enterprises, and they have pretty good incentives not to guarantee junk loans. They’re trying to make a buck first, and appease the politicians second. Sure, if they fail, we’re on the hook for their losses, but I bet they won’t fail.

I bet you’re wrong. According to their latest 10-Q (filed last November), Fannie has guaranteed $2 trillion in mortgages and owns $700 billion. All this on $44 billion in capital. Does this look like a sound balance sheet to you?

The only incentive the Fannie and Freddie CEOs have are to make short-term results look good through the fees generated by mortgage originations. They have virtually no incentive to look at the long-term likelihood of payback on these loans as that won’t affect their bonuses for the next quarter.

My guess is that if the Fannie and Freddie mortgage portfolios were marked to market, they would both be insolvent.

Here’s a link to Fannie’s latest 10-Q.

http://www.sec.gov/Archives/edgar/data/310522/000095013307004526/w40673e10vq.htm

Search for “MBS held by third parties” on that page to see how bad it is. In that little section you can see how enormous their mortgage book of business is and how little capital they have. These guys are goners without additional captial infusions.

I’d give you a link to Freddie Mac’s latest quarterly filing, but I can’t find any:

http://www.sec.gov/cgi-bin/browse-edgar?company=&CIK=fre&filenum=&State=&SIC=&owner=include&action=getcompany

Who knows how bad their situation is.

[TheBreeze]

I’m not too concerned about raising the conforming limit for Fannie and Freddie. These are still private enterprises, and they have pretty good incentives not to guarantee junk loans. They’re trying to make a buck first, and appease the politicians second. Sure, if they fail, we’re on the hook for their losses, but I bet they won’t fail.

I bet you’re wrong. According to their latest 10-Q (filed last November), Fannie has guaranteed $2 trillion in mortgages and owns $700 billion. All this on $44 billion in capital. Does this look like a sound balance sheet to you?

The only incentive the Fannie and Freddie CEOs have are to make short-term results look good through the fees generated by mortgage originations. They have virtually no incentive to look at the long-term likelihood of payback on these loans as that won’t affect their bonuses for the next quarter.

My guess is that if the Fannie and Freddie mortgage portfolios were marked to market, they would both be insolvent.

Here’s a link to Fannie’s latest 10-Q.

http://www.sec.gov/Archives/edgar/data/310522/000095013307004526/w40673e10vq.htm

Search for “MBS held by third parties” on that page to see how bad it is. In that little section you can see how enormous their mortgage book of business is and how little capital they have. These guys are goners without additional captial infusions.

I’d give you a link to Freddie Mac’s latest quarterly filing, but I can’t find any:

http://www.sec.gov/cgi-bin/browse-edgar?company=&CIK=fre&filenum=&State=&SIC=&owner=include&action=getcompany

Who knows how bad their situation is.

[TheBreeze]

I’m not too concerned about raising the conforming limit for Fannie and Freddie. These are still private enterprises, and they have pretty good incentives not to guarantee junk loans. They’re trying to make a buck first, and appease the politicians second. Sure, if they fail, we’re on the hook for their losses, but I bet they won’t fail.

I bet you’re wrong. According to their latest 10-Q (filed last November), Fannie has guaranteed $2 trillion in mortgages and owns $700 billion. All this on $44 billion in capital. Does this look like a sound balance sheet to you?

The only incentive the Fannie and Freddie CEOs have are to make short-term results look good through the fees generated by mortgage originations. They have virtually no incentive to look at the long-term likelihood of payback on these loans as that won’t affect their bonuses for the next quarter.

My guess is that if the Fannie and Freddie mortgage portfolios were marked to market, they would both be insolvent.

Here’s a link to Fannie’s latest 10-Q.

http://www.sec.gov/Archives/edgar/data/310522/000095013307004526/w40673e10vq.htm

Search for “MBS held by third parties” on that page to see how bad it is. In that little section you can see how enormous their mortgage book of business is and how little capital they have. These guys are goners without additional captial infusions.

I’d give you a link to Freddie Mac’s latest quarterly filing, but I can’t find any:

http://www.sec.gov/cgi-bin/browse-edgar?company=&CIK=fre&filenum=&State=&SIC=&owner=include&action=getcompany

Who knows how bad their situation is.

[TheBreeze]

I’m not too concerned about raising the conforming limit for Fannie and Freddie. These are still private enterprises, and they have pretty good incentives not to guarantee junk loans. They’re trying to make a buck first, and appease the politicians second. Sure, if they fail, we’re on the hook for their losses, but I bet they won’t fail.

I bet you’re wrong. According to their latest 10-Q (filed last November), Fannie has guaranteed $2 trillion in mortgages and owns $700 billion. All this on $44 billion in capital. Does this look like a sound balance sheet to you?

The only incentive the Fannie and Freddie CEOs have are to make short-term results look good through the fees generated by mortgage originations. They have virtually no incentive to look at the long-term likelihood of payback on these loans as that won’t affect their bonuses for the next quarter.

My guess is that if the Fannie and Freddie mortgage portfolios were marked to market, they would both be insolvent.

Here’s a link to Fannie’s latest 10-Q.

http://www.sec.gov/Archives/edgar/data/310522/000095013307004526/w40673e10vq.htm

Search for “MBS held by third parties” on that page to see how bad it is. In that little section you can see how enormous their mortgage book of business is and how little capital they have. These guys are goners without additional captial infusions.

I’d give you a link to Freddie Mac’s latest quarterly filing, but I can’t find any:

http://www.sec.gov/cgi-bin/browse-edgar?company=&CIK=fre&filenum=&State=&SIC=&owner=include&action=getcompany

Who knows how bad their situation is.

[TheBreeze]

So do you really think when Hillary is prez that she will let all those people negaming to go down with the ship?

I don’t know. I’m hopeful that this whole thing will blow up before the government has time to act again. Wishful thinking on my part, perhaps.

The fact that the House voted 330-30 for an increase in the conforming loan limits is not encouraging. It makes me wonder if there are any true fiscal conservatives in the government anymore. The fact that the GSEs own or guarantee 40% of the mortgage market now and can own or guarantee up to 80% with the conforming loan limit increase is not encouraging. I’ve also heard that NAR is going to help Fannie and Freddie write the guidelines for the new conforming loan limits. Again, not encouraging.

Fannie is currently guaranteeing something along the lines of $2.6 trillion in mortgages on $40 billion in capital. If those mortgages were to be marked-to-market I think Fannie would be insolvent. Fannie’s next quarterly report is due out soon. Hopefully the next report will show that they are tapped out and can’t buy or guarantee any more mortgages. Probably more wishful thinking on my part.

I know things are going to be bad. I’m just hopeful that the private sector bears a significant portion of the pain as opposed to the taxpayers. I guess we’ll see as this whole mess unwinds.

[TheBreeze]

So do you really think when Hillary is prez that she will let all those people negaming to go down with the ship?

I don’t know. I’m hopeful that this whole thing will blow up before the government has time to act again. Wishful thinking on my part, perhaps.

The fact that the House voted 330-30 for an increase in the conforming loan limits is not encouraging. It makes me wonder if there are any true fiscal conservatives in the government anymore. The fact that the GSEs own or guarantee 40% of the mortgage market now and can own or guarantee up to 80% with the conforming loan limit increase is not encouraging. I’ve also heard that NAR is going to help Fannie and Freddie write the guidelines for the new conforming loan limits. Again, not encouraging.

Fannie is currently guaranteeing something along the lines of $2.6 trillion in mortgages on $40 billion in capital. If those mortgages were to be marked-to-market I think Fannie would be insolvent. Fannie’s next quarterly report is due out soon. Hopefully the next report will show that they are tapped out and can’t buy or guarantee any more mortgages. Probably more wishful thinking on my part.

I know things are going to be bad. I’m just hopeful that the private sector bears a significant portion of the pain as opposed to the taxpayers. I guess we’ll see as this whole mess unwinds.

[TheBreeze]

So do you really think when Hillary is prez that she will let all those people negaming to go down with the ship?

I don’t know. I’m hopeful that this whole thing will blow up before the government has time to act again. Wishful thinking on my part, perhaps.

The fact that the House voted 330-30 for an increase in the conforming loan limits is not encouraging. It makes me wonder if there are any true fiscal conservatives in the government anymore. The fact that the GSEs own or guarantee 40% of the mortgage market now and can own or guarantee up to 80% with the conforming loan limit increase is not encouraging. I’ve also heard that NAR is going to help Fannie and Freddie write the guidelines for the new conforming loan limits. Again, not encouraging.

Fannie is currently guaranteeing something along the lines of $2.6 trillion in mortgages on $40 billion in capital. If those mortgages were to be marked-to-market I think Fannie would be insolvent. Fannie’s next quarterly report is due out soon. Hopefully the next report will show that they are tapped out and can’t buy or guarantee any more mortgages. Probably more wishful thinking on my part.

I know things are going to be bad. I’m just hopeful that the private sector bears a significant portion of the pain as opposed to the taxpayers. I guess we’ll see as this whole mess unwinds.

[TheBreeze]

So do you really think when Hillary is prez that she will let all those people negaming to go down with the ship?

I don’t know. I’m hopeful that this whole thing will blow up before the government has time to act again. Wishful thinking on my part, perhaps.

The fact that the House voted 330-30 for an increase in the conforming loan limits is not encouraging. It makes me wonder if there are any true fiscal conservatives in the government anymore. The fact that the GSEs own or guarantee 40% of the mortgage market now and can own or guarantee up to 80% with the conforming loan limit increase is not encouraging. I’ve also heard that NAR is going to help Fannie and Freddie write the guidelines for the new conforming loan limits. Again, not encouraging.

Fannie is currently guaranteeing something along the lines of $2.6 trillion in mortgages on $40 billion in capital. If those mortgages were to be marked-to-market I think Fannie would be insolvent. Fannie’s next quarterly report is due out soon. Hopefully the next report will show that they are tapped out and can’t buy or guarantee any more mortgages. Probably more wishful thinking on my part.

I know things are going to be bad. I’m just hopeful that the private sector bears a significant portion of the pain as opposed to the taxpayers. I guess we’ll see as this whole mess unwinds.

[TheBreeze]

So do you really think when Hillary is prez that she will let all those people negaming to go down with the ship?

I don’t know. I’m hopeful that this whole thing will blow up before the government has time to act again. Wishful thinking on my part, perhaps.

The fact that the House voted 330-30 for an increase in the conforming loan limits is not encouraging. It makes me wonder if there are any true fiscal conservatives in the government anymore. The fact that the GSEs own or guarantee 40% of the mortgage market now and can own or guarantee up to 80% with the conforming loan limit increase is not encouraging. I’ve also heard that NAR is going to help Fannie and Freddie write the guidelines for the new conforming loan limits. Again, not encouraging.

Fannie is currently guaranteeing something along the lines of $2.6 trillion in mortgages on $40 billion in capital. If those mortgages were to be marked-to-market I think Fannie would be insolvent. Fannie’s next quarterly report is due out soon. Hopefully the next report will show that they are tapped out and can’t buy or guarantee any more mortgages. Probably more wishful thinking on my part.

I know things are going to be bad. I’m just hopeful that the private sector bears a significant portion of the pain as opposed to the taxpayers. I guess we’ll see as this whole mess unwinds.

[Author]

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