GSEs Get the Best Left Hand Jobs

Wednesday, March 31, 2010 , , , , 1 Comments



What I would like to know is: how many of these 1st and 2nd loans belong to Fannie and Freddie?

Using our left hand to jerk off again I see.

A Backdoor Bank Bailout (WSJ):

Today President Obama announced an expansion and modification of his Home Affordable Modification Program (HAMP). While one can debate the merits of incentives to keep unemployed families in their homes while they search for jobs — I personally believe this will more often than not keep those families tied to weak labor markets — what should be beyond debate is the various bailouts to mortgage lenders contained in the program's fine print.

Several of the largest mortgage lenders, including some that have already received huge bailouts, carry hundreds of billions worth of second mortgages on their books. As home prices have nationally declined by almost 30 percent, these second mortgages are worthless in the case of a foreclosure. Second mortgages are usually wiped out completely during a foreclosure if the price has decreased more than 20 percent. Yet the Obama solution is now to pay off 6 cents on the dollar for those junior liens. While 6 cents doesn't sound like a lot, it is a whole lot more than zero, which is what the banks would receive otherwise. Given that the largest lenders are carrying over $500 billion in second mortgages that may need to be written down, we are looking at tens of billions of taxpayer dollars again being funneled to the very banks behind the mortgage crisis.

WSJ says it's a backdoor bank bailout (LOL twice) but JDA smells the stench of GSE all over it. Oh yeah, there it is (Business Week):

The Obama administration announced programs to help U.S. homeowners avoid foreclosure, including subsidies for borrowers who owe more than their home is worth.

The plan expands Treasury Department and Federal Housing Administration efforts and uses funds from the $700 billion Troubled Asset Relief Program. The administration faced a week of criticism from lawmakers and watchdog groups who say the government hasn’t helped enough homeowners stave off foreclosures.

The proposal is part of a broader effort to help the economy recover from the worst recession since World War II, said Diana Farrell, deputy director of the White House’s National Economic Council. The Obama administration will work to make sure “the nascent recovery is sustained” and to preserve confidence in Fannie Mae and Freddie Mac, the government- sponsored enterprise mortgage companies, she said.

“We’ll continue our very committed support to the GSEs,” she told reporters in Washington today.

Ouch. Have you ever been in a situation where you've stood by someone who didn't really deserve your loyalty? That's what's happening with GSEs and the federal government.

Of course, you knew someone had to pick up the slack after the Fed left the market for MBSs. If you thought there was going to be an alternate outcome, I'm sorry but you're wrong. Someone had to keep the market afloat, God forbid we feel the pain (temporarily) and then actually recover. Oh well. Pass the BP JBs.

And I repeat: TARP was not a fucking piggy bank!!

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.

1 comments:

Anonymous said...

In the world of consumer finance, there is a tipping point. Interest rate and repayment term become inconsequential. At some point, the debtor wakes up to the realization that he or she has borrowed more principal than he or she can be reasonably expected to repay in a life time. The only player of any significance in the mortgage market has become Uncle Sam. Hope he has some really good debt collectors working for him. The new phrase being batted around for Jacques Cousteau Snorkel Mortgage holders is that they are no longer “home owners”. They have allowed themselves to become “loan owners”. Should have resisted the temptation and said “Go fuck yourself”. I understand how alluring it can be – I almost took the plunge myself this past year with that Obama Bucks tax credit being hung out there. Glad my little voice started saying “go fuck yourself”. This is going to end very badly for many.