US Government takes over mortgage giants
 

WASHINGTON (AP) -- The Bush administration's seizure of troubled mortgage giants Fannie Mae and Freddie Mac is potentially a $200 billion bet that it will help reverse a prolonged housing and credit crisis.

[url=http://biz.yahoo.com/ap/080907/mortgage_giants_crisis.html]US Government takes over mortgage giants: Financial News - Yahoo! Finance[/url]

Re: US Government takes over mortgage giants
 

This was expected and welcomed. If these two companies went down we're all in trouble. I hope the people responsible for putting these companies in such abysmal state are held accountable (I doubt it but one can only hope).

Interestingly they're making a sweet offer for companies running on empty:

[QUOTE]Treasury will immediately be issued $1 billion of such stock from each company, which will pay [B]10 percent interest[/B]. Further purchases of preferred stock will be triggered if quarterly audits find that the companies' capital cushion is below prudent standards.[/QUOTE]

Re: US Government takes over mortgage giants
 

the reason they're in such horrible straits is due to thousands of individual neg am. mortgage salesmen selling bad loans (which the financial sector encouraged, or at least turned a blind eye) and the huge bonuses given per loan (up to 30-40k PER mortgage contract).

those guys are obviously out of business now, but they got their money before it burst.

Re: US Government takes over mortgage giants
 

[quote=That Guy;473728]the reason they're in such horrible straits is due to thousands of individual neg am. mortgage salesmen selling bad loans (which the financial sector encouraged, or at least turned a blind eye) and the huge bonuses given per loan (up to 30-40k PER mortgage contract).

those guys are obviously out of business now, but they got their money before it burst.[/quote]
Blame does not all go to the loan officers. The people who took out these loans also made very poor decisions of what to do with the money they saved with the interest only loans. Many did not take the extra money and pay down their principle or put it away in savings. Allot of them took the money and spent it on new cars and other stuff and now when their loan is converting they are stuck. Why can't they just refinance at current rates? Its because they are now up side down in their loan from failure to pay down the principle or they now have other dept. Also now that their payment has gone up that money they saved with interest only has been spent and tied up in car payment or in other things. I know several loan officers and none of them made 30 to 40 k on and loans they did.

Re: US Government takes over mortgage giants
 

[quote=That Guy;473728]the reason they're in such horrible straits is due to thousands of individual neg am. mortgage salesmen selling bad loans (which the financial sector encouraged, or at least turned a blind eye) and the huge bonuses given per loan (up to 30-40k PER mortgage contract).

those guys are obviously out of business now, but they got their money before it burst.[/quote]

Bonuses to the sales persons or the company?

Re: US Government takes over mortgage giants
 

Where's the bailouts for the consumers?

Re: US Government takes over mortgage giants
 

[quote=firstdown;473741]Blame does not all go to the loan officers. [b]The people who took out these loans also made very poor decisions[/b] of what to do with the money they saved with the interest only loans. Many did not take the extra money and pay down their principle or put it away in savings. Allot of them took the money and spent it on new cars and other stuff and now when their loan is converting they are stuck. Why can't they just refinance at current rates? Its because they are now up side down in their loan from failure to pay down the principle or they now have other dept. Also now that their payment has gone up that money they saved with interest only has been spent and tied up in car payment or in other things. I know several loan officers and none of them made 30 to 40 k on and loans they did.[/quote]

Of course they did. However, it's the bank's responsibility to minimize their risk. If they give out loans to all these people who aren't financially disciplined, and they default on their loans, the bank has to bear that burden. Well, the banks overextended themselves, and now it's a crisis, because they loaned too much money to too many people who shouldn't have qualified.

Re: US Government takes over mortgage giants
 

[quote=Mattyk72;473760]Where's the bailouts for the consumers?[/quote]


They suffer. It is not fair, but what should be done with the people who did got a fixed loan and make their payments. Shouldnt they be rewarded for being responsible. Instead all of their neighbors get bailed out, or forclose, and they actually get hurt just as bad on the value of their homes.

Re: US Government takes over mortgage giants
 

[quote=drew54;473870]They suffer. It is not fair, but what should be done with the people who did got a fixed loan and make their payments. Shouldnt they be rewarded for being responsible. Instead all of their neighbors get bailed out, or forclose, and they actually get hurt just as bad on the value of their homes.[/quote]


I had a interest only loan and really was not about the monthly savings (it was difference of $100 to $200 a month). The reason I did it was for the tax returns. Now I refi my interest only mortgage and my payment went up $100 or in that ball park.

I am just trying to say don't lump all interest only loans as bad. I think it is bad when you used an interest only loan to try to get in to a house that was totally out of your budget.

Re: US Government takes over mortgage giants
 

[quote=drew54;473870]They suffer. It is not fair, but what should be done with the people who did got a fixed loan and make their payments. Shouldnt they be rewarded for being responsible. Instead all of their neighbors get bailed out, or forclose, and they actually get hurt just as bad on the value of their homes.[/quote]

The banks should have been more responsible too with the mortgages they handed out to anyone and everyone. It goes both ways, unfortunately it's always the little guy that gets F'd in the end.

Re: US Government takes over mortgage giants
 

If a Democratic Congress were ever to prove useful, it would be to hold some of these Wall Street crooks to account. I'm not holding my breath, though.

Re: US Government takes over mortgage giants
 

yes they gave a mortgage to people who did not qualify.They lost a fortune what a shocker.Now the taxpayers take the hit. The govt is broke we have nothing left to sell even our houses are not worth crap. Back in the 80s we still had real estate that the japanese were buying up. Now we can only borrow.

Re: US Government takes over mortgage giants
 

I'm a loan officer and commissions are no where near what was mentioned above. As a loan officer, I make recommendations to clients based on their goals and situation then leave it up to the client to decide.

It's not necessarily the I/O loan that's gotten everyone in this mess, it's mostly subprime and the option arm (neg am). There are alot of good lenders out there and some not so good. There's also consumers that hear what they want to hear and choose not to do the right thing. Do I make a normal payment or do I spend it on something else? So it's a mix. I've never done a option arm by the way.

The products that I recommend are not pushed by the company. They are, as i said, what I recommend based on the clients situation. I get paid the same no matter what product i close.

So yes, there as some losers in the mortgage industry but not everybody. At the very least, hopefully this will weed out the unprofessional.

Re: US Government takes over mortgage giants
 

No company makes 20k on a loan too, that's ridiculous. A normal mortgage company might make 1/4 pt to 1pt on a loan after all overhead expenses are paid (underwriters, processors, closers, etc). Most are closer to the 1/4 pt right now.

Re: US Government takes over mortgage giants
 

[quote=drew54;473870]They suffer. It is not fair, but what should be done with the people who did got a fixed loan and make their payments. Shouldnt they be rewarded for being responsible. Instead all of their neighbors get bailed out, or forclose, and they actually get hurt just as bad on the value of their homes.[/quote]
My reward is that my credit is still good and I'm not stuck in a home or waiting to get kick out of my home.

Re: US Government takes over mortgage giants
 

This is a quote from John Mauldin's weekly newsletter (you should subscribe to it if your interested in the financial world) but it's partly congress that got us into this.

From the Frontline Weekly Newsletter from a week or so ago:

As long as the prices of homes kept rising, Fannie and Freddie had no problems. That extra leverage allowed them to post record profits every quarter, boosting stock prices and keeping those bonuses and options for executives rising. And Congress let them do it. In fairness, there was a significant minority who wanted tougher regulations, including the Bush administration. But a bipartisan majority decided to take the campaign contributions and listen to the fabrications about how much Fannie and Freddie did for the country and how there was no risk.

And so now we are at a point where we are going to be forced to pick up the very expensive pieces. The alternative is to let the world as we know it go up in smoke. The mortgage market is dysfunctional now without Freddie and Fannie. The housing crisis would be far worse if you let them die. And once you determine to pick up the costs, you have gone down a very slippery slope. Yet if we don't do it, the systemic crisis will be far worse than the problems resulting from Bear, and those would have been horrific.

This is the Savings and Loan Crisis, Part 2. Maybe they can figure a way to lessen the cost. And the hope is that at some point the companies once again regain their value and the costs will be somewhat mitigated.

Re: US Government takes over mortgage giants
 

[quote=Mattyk72;473760]Where's the bailouts for the consumers?[/quote]
If I'm correct the goverment is requiring the mortgage co to convert the loans over to a 30 year fixed loan regardless if the consumer is up side down in the loan. I think there is a few other thing they are doing but I'm not sure what they are.

Re: US Government takes over mortgage giants
 

[quote=firstdown;474008]My reward is that my credit is still good and I'm not stuck in a home or waiting to get kick out of my home.[/quote]


Agreed, but if in 5 years your ready to move and there are still 12 houses for sale on your street, that sucks.

Re: US Government takes over mortgage giants
 

Well [URL="http://www.reuters.com/article/RussiaInvestment08/idUSL816846420080908?pageNumber=1"]this is interesting[/URL].

[quote]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. The holdings have since been reduced by around 40 percent.[/quote]You know what's really sad? The Russians have $582.5 billion to invest.

Re: US Government takes over mortgage giants
 

[quote=drew54;474067]Agreed, but if in 5 years your ready to move and there are still 12 houses for sale on your street, that sucks.[/quote]
Well when I purchased my home in that boom back 4 years ago I knew that it could not last but so long. The home I purchased was a for sale by owner by a doctor who I hope knows more about his practice then selling a home. I purchased the home for around $100,000 less then what the market would bear so I'm in great shape anytime I ned to sell my home.

Also I don't think it has become that bad in most areas that 12 houses are for sale on one street.