Sorry you have no grace--I wrote that from my own memory, didn't copy a word. I was being nice to you; some of what you wrote was patent nonsense.
As for the above, all those loans come to Freddy and Fanny insured at closing as each investor requires (some don't, of course, if they are conventional). As a private company, Freddy doesn't guarantee any Freddie Mac mortgages sold to investors which makes sense because these are conventional with 20% equity, presumably. Most still have PMI on them to protect the investor.
Fannie, (again a private company) can guarantee its loans through it's collaboration with Ginny (a wholly owned agency of the feds under HUD) which arrangement is called the "tandem plan." Fannie buys high-risk, low-yield loans (usually FHA) with Ginny guaranteeing payment, absorbing the difference between the low yield and market prices. I suppose your point is that Ginny got the infusion, through HUD from the taxpayer. That must be the price of liquidity for Fannie Mae FHA and VA loans within the current operation.
Ginny also guarantees what are called "pass through certificates" which are securities backed by FHA and VA principal and interest payments . I buy these for our HOA from a local stockbroker.
Remember, $100 million in loans is only about 500 loans--drop in the bucket.
depends on who owns the bucket
And pretty much yes to everything you said up there. From the beginning of this I THINK we have been saying a similar thing. The guarantees for loans, no matter who starts holding them pretty much end up with a government tab at the end when things go to shit.
You obviously know something about mortgages so you know about Regulation H, it's appendices and all the legal stuff that goes with it. That is where I got the basis from much of my information.
I have a friend who was "retired" as a Federal Banking Examiner back in 2002 when they reduced the "need to regulate the industry" by 4000 examiners. He went to work for a local bank as a compliance officer until it was bought by Wachovia last year. At that point he jumped on a retirement offer as he didn't want to deal with a large corporate entity.
He is one of the group of 12 of us that get together weekly to do basicly what we do here on BWOT. In late 2006 I started my incessant bitching about the Subprime issue and lack of regulation and got a great education in the process. As this has moved through the last year both he and I have been talking it up as we are apt to do. He is pretty conservative across the board and I am VERY conservative on fiscal matters so we at least agree on much of this issue.
Around November I was mumbling about finding that last really good job. As was he. He and several other of the retired Examiners got together and pulled me in to look at a project. That is what got me intimate with Regulation H and all its subcategories. To that end we have a very nice 690 page proposal that has already received a House Finance Committee blessing and is in final grant stage. Best part, there is minimum government involvement or monies. The project analyzes failing/failed loans and recommends actions based on results.
In typical Bear fashion the ones responsible will be paying for this. The banks and the borrowers. Funny that.
30,000 foot version, mortgages in trouble [at or near foreclosure] are in four categories [you have read much of this before]
1)Conspicuous Consumer: Refied and used the house as an ATM and bought everything in site. Basic resolution: Freeze rate on house OR foreclose and push to smaller house, freeze rate on Credit cards at payoff level [12-15%] Flag Credit Bureau for Five Years
2)Flippers/Developers/Spec Buyers: Bought on Spec or Flipping houses for profit and developers in business to sell houses. Basic resolution: Foreclosure and Bankruptcy - the banking system is not Las Vegas
3)Crossfire: This is a small group of folks that bought in, within their budgets but circumstance beyond their control has put them at risk. Basic resolution: Freeze rates on mortgage and credit cards to allow payoff ability. POSSIBLE outside assistance.
4)Predator Target: This group, while not large, exists and once established by analysing previous buying/paying patterns be placed in this category. Basic resolution: Modify loan arrangement to meet realistic payback schedules based on real income potential. Freeze credit card rates to allow payoffs and flag on Credit Bureau of target status to avoid further damage to credit.
That is the 30,000 foot version of a system that would provide relief for the folks that were targeted by predatory lending practices [with potential government or financial sector assistance for balance], provide an ability for Crossfire and even Conspicuous Consumers to start over [although Conspicuous Consumers would pay a high price on their ability to get future credit] and deny gamblers any relief. And the vast majority of the effort would be paid for/accounted by lowered rates, fixed rates and reconfiguration by banks, not government action.
We should have answers by my birthday. [in April]