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September 8, 2008
Government Rescues Fannie and Freddie
The federal government will take over Fannie Mae and Freddie Mac, our largest and most troubled mortgage finance companies, with an estimated taxpayer price tag of $25 billion (one source told the New York Times that the number was a modest guestimate, though). In one of the county's most expensive bailouts, the government can put up $100 billion for each company should they need cash — they handle about half of the country's mortgages — and will encourage them to shrink their holdings; the Treasury can buy the two companies outright for a small pricetag, and is already changing the management team. The Fed sees the buyout as the silver bullet for the housing crisis, and already foreign markets have rallied since the announcement. Will it work, do you think?
In Rescue, U.S. Takes Over Mortgage Finance Titans [NY Times]
Fannie Mae. Photo by NCinDC.
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Comments
See my comments below in Monday Links.
This is an extremely important move for the credit markets.
Posted by: daveinbedstuy at September 8, 2008 9:15 AM
correction:
It is not one of the most expensive bailouts. It is THE most expensive bailouts in the history of the world.
Thanks taxpayers!
SUCKERS!
Posted by: Prodigal_Son at September 8, 2008 9:24 AM
The now almost universally accepted
S&P/Case-Shiller index for housing has been falling
relentlessly since mid-'05. Then, housing was rising on
average around the country by 18% on an annualised
basis. Now, it has had its sign reversed; housing is falling
18% on an annualised basis, and the speed with which it
has been falling has been increasing. It is not a pretty
sight, and in some instances it is sickening.
However, perhaps Case-Shiller over-states the situation.
We came across a chart of housing as measured by First
American CoreLogic, which apparently covers 950 cities
and towns around the country, giving each equal
weight. The Case-Shiller Index covers only 20
cities, and is focused primarily upon the coasts,
and as everyone everywhere knows it is
the coasts that are suffering the most severe
price declines in housing. The "red" states in the
midwest have seen prices fall, but not nearly as
precipitously as have those in California and Florida.
We note then that were First America CoreLogic's index
at its height only had housing prices rising 15% in
mid-'05, they have had housing prices falling recently
only 11%... and they've stabilised there. Indeed First
America's index has not worsened since January. Prices
are still falling, but they are falling less swiftly, and that is what must needs be done in any bear market of any
asset before prices can stop going down and eventually
can begin rising: the speed of the descent must halt.
Fist America CoreLogic would have us believe that that is
exactly what is happening. If FACL is right, and if the
past is any prologue to the future, prices might actually
begin to strengthen later this year.... and if the action
taken by Treasury over the weekend does what we think
it shall, price may begin rising this autumn.
From today's Gartman letter.
Prodigal Son, you're sounding very "What-like" today. Aren't you too a taxpayer!!!!!???
Posted by: daveinbedstuy at September 8, 2008 9:30 AM
Sorry PS....I know you're not. But you sounded so with that post.
Posted by: daveinbedstuy at September 8, 2008 9:37 AM
Dave--what is your explanation for the divergence of First America and Case-Shiller? I am wondering how they come to such different conclusions.
Posted by: wasder at September 8, 2008 9:45 AM
wasder....I have none. I only meant to present the data. The significance is that the First America data is of many more cities (950 vs. 20)and more broadly representative of the country as a whole and therefore more representative of the "market" in economic terms
Posted by: daveinbedstuy at September 8, 2008 9:54 AM
It looks like they've been spending the cash keeping the lawn green to judge from the tinder grass on the nearside of the the wall.
Posted by: dittoburg at September 8, 2008 10:13 AM
As with prior bailouts (LTC, RTC) - I predict the Gov't will make a fortune on this one as well.
That being said - the whole necessity of the thing demonstrates the complete and total failure of the Bush Administration over the last 8 years.
Posted by: fsrg at September 8, 2008 10:39 AM
This is the latest and most egregious example of "Privatize the profits; socialize the losses."
Posted by: SnarkSlope at September 8, 2008 10:54 AM
I'm not familiar with the First America data, but I have a question: are the 950 cities weighted equally? In which case, it is true that each city's average housing prices would have equal representation in the sample, but the economy would not be fairly represented because the coasts account for a disproportionate share of population and economic activity.
Posted by: Back40 at September 8, 2008 10:57 AM
Is anyone else curious that What is so quiet this morning? I expected him to come out guns blazing? Hmm.
Posted by: cobblehiller at September 8, 2008 11:20 AM
do I sell my fannie and freddie stock...I bought low, but it's lower now....shit.
Posted by: bayridgegirl at September 8, 2008 11:23 AM
Welcome back, DIBS:
Thank you for the information you posted. Any thoughts you'd like to share about what you see happening in the next 6-months or so in the stock market? Do you agree that this will help housing prices in the short-run (@9months)?
Posted by: MacD at September 8, 2008 11:23 AM
Be aware thet the Treasury did not write any checks or give out any money to freddie & Fannie over the weekend. They will buy the mortgage backed paper in the open market and they wikll hold it as a saleable asset.
They took preferred stock that pays the government a dividend and they are likely to make money on that as fsrq points out.
This was all done only to assure the value of the mortgege-backed securities on the balance sheets of the banks throughout the world. Up until now they were only "quasi-guaranteed" b y the US government and thats why they went down in price. They are now guaranteed. fannie & freddie no longer report to their boards or the shareholders but now report to the FAHA.
When the Bank of Japan did a very similar preferred stock bailout of the Japanese banks in 2003, they made a ton of money on those preferreds.
Posted by: daveinbedstuy at September 8, 2008 11:25 AM
MacD...i don't think housing prices will rise in the short run. Although this move has lowered mortgage rates by about 35 basis points today the problem is still that banks continue to tighten lending standards.
If this move revalues upwards a lot of the securities being held by banks then perhaps they will loosen their lending standards.
There has been some discussion that once Congress is back in session and starts the blame game again that there will be an effort to force the FAHA (now Fannie & freddie's boss) to direct them to lower lending standards....which is why we got into this mess in the first place!!!
Anecdotally, one of my colleagues just told us that a friend is in the process of selling a $1 mm plus condo here in Manhattan and two days before closing the buyers lender (Chase) came back and said they want 30% down instead of 20%.
Posted by: daveinbedstuy at September 8, 2008 11:32 AM
"Is anyone else curious that What is so quiet this morning? I expected him to come out guns blazing? Hmm."
Nope, I just amazed there is no reaction to this story.
"Prodigal Son, you're sounding very "What-like" today. Aren't you too a taxpayer!!!!!???"
If someone sounds " What Like" what is the problem, Dave? Everyone is not to the "Happy Happy Joy Joy" crap.
The bailouts will cost Taxslaves about 300 billion dollars! The last 5 years have been a joke. People selling houses to each other. Our Manufacturing jobs was sent overseas. Our saving rate fell and our standard of living has fell off. Are better off today than five years ago? I don't think so. The average America has to work harder just to get by while the Big Boys get bail out.
If you believe the Fannie Mae and Freddie Mac bail out was good for us then you are a moron. The crash is being set up and when it happens. it's going to very bad.
More "Bail outs" coming.
The What
Someday this war is gonna end...
BTW Interest rates are going to the moon!
Posted by: what at September 8, 2008 11:34 AM
I have to echo Dave's comment at 11:25. Basically, this (like the Bear Stearns bailout) wipes out the stockholders who elected the directors who appointed the management who overfinanced the house that Jack bought. It bails out the creditors who own Freddie and Fannie debt. Failure to do this (as the Japanese central bank delayed for years) would, at best, keep the country mired in an economic slump driven by tight credit and inflation from increased fuel costs, and at worst, if Freddie and Fannie went bankrupt, could have started a debt-market meltdown to rival the equity-market meltdown of 1929-32. This may or may not end up costing the taxpayers billions, but it spreads the risk amoung all of us, and gives us the upside from stability and availabilty in the debt markets. The Bush Administration got this one right (thus proving that even broken clocks are right twice a day).
Posted by: ProfRobert at September 8, 2008 11:35 AM
"but it spreads the risk amoung all of us"
Thanks Prof. As I said, "Privatize the profits, socialize the losses. This won't be the last.
Posted by: SnarkSlope at September 8, 2008 11:40 AM
BTW Interest rates are going to the moon! OK What
Which interest rates are "going to the moon" What???? 30 Year treasuries which have been the most resilient have even moved from about 5.40% to 4.30% over the past 12 months......shorter rates are down even more.
Mortgage rates are down about 35 basis points today.
Where are you getting your facts? The usual place? Pulling them out of your ass???
Posted by: daveinbedstuy at September 8, 2008 11:41 AM
There's nothing wrong with what was done today. Although it reeks of socialism, nationalism or whatever you want to call it it was a great example of capitalism at work. The shareholders always take the greatest risks. And they were the ones who got wiped out.
The only unfortunate thing for individuals is that some of the Fidelity, Capital, Wellington and other mutual fund companies have been buying Fannie & freddie shares for YOUR mutual funds. The analysts and fund managers there should be fired!!!!
LOOK ON YOUR STATEMENTS TO SEE IF YOUR MUTUAL FUND HAS BEEN ADDING TO FANNIE & FREDDIE.....and then call them!!!!
Posted by: daveinbedstuy at September 8, 2008 11:47 AM
Snarkslope: Not sure what you mean. If Treasury has to perform on its guarantees, then it gets essentially all the equity interest in the companies. If they rebound, Treasury (i.e., taxpayers) reap the profits. If Treasury doesn't have to perform (i.e., the companies right themselves), then the equity holders who have seen an 80% drop in the value of their shares reap the profits. In other words, if the losses end up socialized (i.e., funded by the taxpayers), any upside goes back to the taxpayers. If the losses are not socialized (i.e., the companies manage without federal funds), then the owners of the companies benefit. In the worst case, both equity (private) and taxpayers (public) take hits.
Posted by: ProfRobert at September 8, 2008 11:52 AM
"Which interest rates are "going to the moon" What???? 30 Year treasuries which have been the most resilient have even moved from about 5.40% to 4.30% over the past 12 months......shorter rates are down even more."
Investors are fleeing other asset classes and buying Treasuries. This action pushes rates down but, mortgage spreads have been rising for a while now. Plus is banks are offing CD's at 5%, why do you think they will loan money at 6%? Banks are trying to shore up the balance sheet. Here Dave keep your eyes on this.
http://www.mortgagebankers.org/
http://www.bloomberg.com/markets/rates/index.html
"Mortgage rates are down about 35 basis points today."
It will get very expensive to borrow money very soon and I think this "bail out" is setting up the crash..
I'm not going to argue with people today because you don't understand the magnitude of this action. The balance sheet of the US government is trashed....
The What
Someday this war is gonna end..
BTW Dave you are the only one happy about this bail out. Maybe you get to keep your Hedge Fund job until the end of the year....
Posted by: what at September 8, 2008 11:55 AM
OK What...using your own cut and paste...
http://www.bloomberg.com/markets/rates/index.html
Page down to the Municipal Bonds...they are the only data points where you can see where rates have moved from one-week, one-month and six-months ago.
They are as good example as anything but ALL THE RATE QUOTES ARE DOWN OVER EACH AND EVRY ONE OF THOSE TIME PERIODS
Learn to read and interpret your own data correctly Asshat.
I guess I am the only one happy about this. And I'm the only one driving the stock market and the $ up today. It's all my own doing, no one else in the world is happy. Asshat.
Posted by: daveinbedstuy at September 8, 2008 12:03 PM
This story is a real snoozer. This will have almost no effect on the mortgage markets. The real story is in non-Government market players. This is particularly true in the pricier areas of NYC, where a lot of the lending is not fed through the Fannie/Freddie system. Yawn.
It's like you just got a flat tire and you're looking under the hood to see what's wrong.
Posted by: lechacal at September 8, 2008 12:08 PM
I don't think DIBS is hurting for a job, What. My best guess is that he has a well established bail out plan for himself that is well under way. Once can only take but just so much corporate drama.
Posted by: MacD at September 8, 2008 12:09 PM
"do I sell my fannie and freddie stock"
bayridgegirl,
If you can get a dollar a share, that's a buck more than nothing.
Posted by: Bklnite at September 8, 2008 12:25 PM
Dave I'm not going back and forth with you today. If anyone believes this bail out is good then live accordly. Do out and buy something! Don't worry about the bailout it's just money anyway. Don't worry about that 300 billion of taxpayer money, you are helping the Big boys.
The What
Someday this war is gonna end...
Posted by: what at September 8, 2008 12:26 PM
I guess it just ended What if you can't back up your statements with even the data that you provide.
Posted by: daveinbedstuy at September 8, 2008 12:43 PM
Is this is where the what disapprears and Dow shows up?
Dave, after you prove me wrong, don't argue with me.
Posted by: 11233 at September 8, 2008 12:49 PM
Adam Dahill, a mortgage banker, posted this in the Forum a few minutes ago...
"Not sure if anyone is currently in contract or looking to refinance but interest rates are amazing today. They will probably go back up a little in the next few days as this may be a knee jerk reaction to Fannie and Freddie getting bailed out by the gov.
If you are paying 1pt you are at 5.625% on a 30yr fixed.
No points you are under 6% at 5.875% today on the 30yr fixed.
Call you broker or banker if you are currently floating to lock in."
Evidence enough to anyone that 1. rates are going down and 2. that this bailout or nationbalisation (call it what you will) will do some good to the economy as a whole and the guy who can qualify for a mortgage.
Posted by: daveinbedstuy at September 8, 2008 12:59 PM
11233--this is definitely when the switcheroo happens. Stay tuned.
Posted by: wasder at September 8, 2008 1:01 PM
I'm going to go off. This would be such a day for a good rant but, there is a bigger problem. I realized that people just don't comprehend the magnitude of this bailout. We are in serious trouble with our financial system and I'm still sticking to me original thesis of a major crash this fall that will rival the Great Depression. So far this year our deficit will be around 600 billion dollars and will raise our borrowing cost worldwide.
The Fannie Mae and Feddie Mac will go down as the biggest swindle of our lifetimes.
The What
Someday this war is gonna end....
Posted by: what at September 8, 2008 1:12 PM
dave - let's see where MBS spreads go over the next few weeks - that's the real litmus test.
Posted by: BrooklynLove at September 8, 2008 1:18 PM
But seriously What. If this action were viewed by the collective knowledge of the world, i.e. the markets, then the dollar would be getting pummeled and the world would be selling treasuries....neither one is happening today.
I still think we'll have an October '87 crash that will rebound quickly but nothing like a Great Depression.
A major crash and a major depression are two completely different things.
There's too much cash sitting on the sidelines in money market funds that would start buying with a 500 point plus market fall. Last week the market fell about 800 points in 3 1/2 days and has made up half of that in the past two days.
Posted by: daveinbedstuy at September 8, 2008 1:23 PM
Dave--an October 87 type event would still be pretty dramatically bad no?
Posted by: wasder at September 8, 2008 1:27 PM
I continue to submit that the Fannie/Freddie news will not affect NYC real estate. When the short-term noise subsides Fannie and Freddie will be doing exactly what they were doing before the bailout. If anything, they might get more conservative, which would actually be a net negative. Beware the law of unintended consequences.
Posted by: lechacal at September 8, 2008 1:35 PM
The market was back to its pre-crash level by July '89...not really that long of a time in an "investment time horizon"
But things are different now!!!! LOL The market will be a lot more volatile on a day-to-day basis, as it has been. It is already down 20% from the high back in October of last year.
And then there is that annoying little Israel/Iran thing!!!
Posted by: daveinbedstuy at September 8, 2008 1:41 PM
Remember that WaMU thing I was talking about? Well the Fannie and Freddie news are shadowing this news.
WaMu replaces CEO, signs agreement with regulator
Shares of nation's largest thrift slump 16% after OTS agreement
http://tinyurl.com/6y5n3r
"The lender also said it signed an agreement with its main regulator, the Office of Thrift Supervision, which requires it to provide an updated business plan and forecasts for results, asset quality, capital and the performance of business segments."
A letter of understanding means that you are fucked!
Hey Dave your augments are losing some stream. Even when you minion Wasder questions your judgement, I know you are just blowing your horn. I expect the financials to get murdered this week.
The What (Tick.. Tick.. Tick..)
Someday this war is gonna end...
Posted by: what at September 8, 2008 1:53 PM
but fake what - The What's initial premise over a year ago was that the financial apocolypse was specifically relevant in that it meant the ulitmate demise of NYC real estate.
let's do a little historical survey of the past year or so -
1) collapse of countrywide
2) collapse of bear stearns
3) collapse of indymac
4) collapse of fannie and freddie
5) global equity markets pretty much all in bear territory
6) biggest US nationwide housing slump since great depression
BUT
7) NYC real estate prices have barely budged
What had happen?
Posted by: BrooklynLove at September 8, 2008 2:03 PM
Awesome, im glad my taxes are now paying to bail-out / help all these idiots who took on loans they couldnt afford out of greed.
Sweet. I do the right thing, act within my budget and do so conservatively. and get screwed several times over.
fiasco.
Posted by: lionballs at September 8, 2008 2:06 PM
I am not questioning anybody's judgement in this thread, just trying to ask some questions that help me understand the ramifications of this deal. I asked Dave because I know he is a big boy and can answer a reasonably asked question in a reasonable manner. Dave knows I am not calling him out, but neither in this case am I calling you out WHAT.
Posted by: wasder at September 8, 2008 2:08 PM
lionballs....none of this so far is bailing out the "idiots who took on loans they couldn't afford." This bails out the financial institutions and governments who bought the bonds that were backed by mortgages; necessary to protect the global banking system.
Posted by: daveinbedstuy at September 8, 2008 2:14 PM
But What you leave out this nifty little detail re: WAMU's ex -
"Mr. Killinger could walk away with an exit package worth as much as $23.5 million, according to an analysis by James F. Reda & Associates."
- NYT
They screw up, and they walk away will MILLIONS. I hae to go throw up now.
And the new guy, Fishman - this is interesting, in a local way - Is the guy that sold Independence Savings Bank to Sovereign.
Posted by: cobblehiller at September 8, 2008 2:29 PM
Sorry - bad typing...I meant:
They screw up, and they walk away with MILLIONS. I have to go throw up now. Really.
Posted by: cobblehiller at September 8, 2008 2:30 PM
If what you're saying is true, it's probably a good idea to put in some "stop losses." I've seen the market go into correction mode too many October's in a row now, and this little ongoing credit/correction issue won't make matters any better this time around.
Posted by: MacD at September 8, 2008 2:30 PM
"1) collapse of countrywide
2) collapse of bear stearns
3) collapse of indymac
4) collapse of fannie and freddie
5) global equity markets pretty much all in bear territory
6) biggest US nationwide housing slump since great depression
BUT
7) NYC real estate prices have barely budged
What had happen?"
Nothing......
I'm going out to enjoy my day. I realize that I have no control what happens and I will not worry about it. If you believe that the actions of our Government was just on saving Fannie and Freddie then go out and buy something. There is no problems, life will go on....
The What
Someday this war is gonna end...
Posted by: what at September 8, 2008 2:46 PM
Wasder asked: "Dave--an October 87 type event would still be pretty dramatically bad no?"
DIBS answered: "The market was back to its pre-crash level by July '89...not really that long of a time in an "investment time horizon"
Now I'm gonna put on my 'What' hat.
DIBS forgot to mention that while the market recovered, can we discuss what happened to NYC Real Estate as a direct cause of the Crash of '87? All the investment bankers who worked on portfolio insurance and other arcane derivatives got fired! Therefore all the condos that got built in the last boom (late '80s) took a bath. It took until the mid 1990s for RE to recover.
Same thing is happening/will happen over this. All the bankers doing securitization, CDOs, credit swaps, and all this other arcane sh*t are history! Very little of Wall Street employment these days is based on stock and bond trading. They make money on the wacky sh*t that blows up in your face!
Just like 1989-1995, when all these high paid folks were out of work and therefore not interested in buying new condos, so the same thing is already starting to happen. There will be fewer buyers. Compounding this, condo supply is still soaring as more and more projects are coming on the market. Less demand + more supply equals big price chops!
Unlike Da What, I don't believe this predicts a major crisis or depression. It just means you'll be taking a 20-30% haircut on your recently bought real estate investment. But, if you didn't put 3% down, and plan to stay for the long term, you'll be fine over the long term. Manhattan Real Estate (and I think by now we can extend this to Brownstone Brooklyn)has been an excellent long term investment, and always will be.
Shall we discuss what the bear market of 1973-1975 did to Manhattan real estate? No? So why will this bear market be different?
Posted by: denton at September 8, 2008 2:47 PM
"I know he is a big boy and can answer a reasonably asked question in a reasonable manner. "
BTW Wasder, Dave is not a big boy. Bill Gross, Warren Buffet, Carl Pickens and the Bush dynasty are Big boys. Dave is the little Assfuck who carry out their deeds...
The What
Someday this war is gonna end...
Posted by: what at September 8, 2008 2:49 PM
I'm waiting to hear some more shit fly about the severance packages of the CEOs...one of them got $9 MM and the other got $14 MM!!!!!
Posted by: daveinbedstuy at September 8, 2008 2:56 PM
Hey What, who is Carl Pickens?????????? Typical What
Posted by: daveinbedstuy at September 8, 2008 2:58 PM
Dave: I think the what has a crush on you.
Posted by: 11233 at September 8, 2008 3:15 PM
This should take some of the wind (or hot air) out of What's sails:
Carl McNally Pickens (born March 23, 1970 in Murphy, North Carolina) is a former American football wide receiver in the NFL who played for the Cincinnati Bengals, Dallas Cowboys and Tennessee Titans.
Before his NFL career, Pickens played college football for the University of Tennessee from 1989-1991, where he caught 109 passes for 1,875 yards and 13 touchdowns, and made the College Football All-America Team as a senior.
In 1992 Pickens was named The NFL Offensive Rookie of the Year by the Associated Press. In 1995, he set a Bengals record for receptions in a single season with 99, and touchdown catches with 17. Pickens later surpassed his own record by recording 100 receptions in 1996. In his 9 NFL seasons, Pickens recorded 540 receptions for 7,129 yards and 63 touchdowns, while also gaining another 307 yards and 1 touchdown on punt returns. As of 2007, his 530 receptions are the 2nd most (Chad Johnson) in franchise history, while his 63 touchdown catches are a franchise record.
He is also known for the "Carl Pickens Clause". This was a loyalty clause that the Bengals created and added to Pickens' contract which would cause him to forfeit all or some of his signing bonus if he insulted the organization in public. This clause has since been used in contracts with other players.
Common Nicknames
Carl 'Easy' Pickens
Carl 'Slim' Pickens
[edit] External links
Posted by: MacD at September 8, 2008 3:16 PM
I've been on here too long. I was just reading something about a company's assets and I read the word as asshats!!!
Posted by: daveinbedstuy at September 8, 2008 3:19 PM
Franklin Raines walked out of Fannie Mae with 40 million, even after the Feds slapped him on the wrist. He's probably chuckling to himself on some golf course right now.
Is Citi next on the bailout block?
Posted by: buttermilk channel at September 8, 2008 3:31 PM
Denton: Good post. I think you are right that those who are not looking for a quick turnaround on their property should be fine in the long run. Thanks for being able to look at both sides of this issue and express yourself eloquently.
What--Go out and enjoy your day for sure. You deserve it. What will you do? Pull the wings off butterflies? I can't imagine what cruelty brings you your jollies.
Posted by: wasder at September 8, 2008 3:40 PM
He meant Carl Icahn & T. Boone Pickens but trying to deal with all those names at once was too much for the What's mind. When you're in the middle of an Asshat mutant real estate bubble that's about to cause the biggest depression in modern history you sometimes don't get the details right, which is, of course where the devil lies!!!!
Posted by: daveinbedstuy at September 8, 2008 3:41 PM
Just got Intrady pricing notifications that rates improved again this afternoon.
I'm not getting involved in the fight. Just posting what I see from my end of the screen.
Posted by: Adam Dahill at September 8, 2008 3:53 PM
Adam...this is not a fight. It's a friendly conversation about Brooklyn, inside and out!!!
You'd do well if you jumped in. You certainly made me look a bit foolish a few months ago on Jersey City. And there aren't many people on here that can make me look foolish!!!
No further discussion on the latter is necessary.
Posted by: daveinbedstuy at September 8, 2008 4:03 PM
I really haven't made my mind up on the Fannie/Freddie thing. I have always thought it was a little biased that they were publicaly traded companies that were government sponsered... so right off that back they always since inception had a little help from Uncle Sam.
Aside from helping me with my business I still think that it will help the housing markets not hurt them. It will lend stability, as well as not pander to the stock holders as most corporations do. Maybe now they will be more concerned with people's homes than corporate profit. The downside is now it will definetly be run like a government agency with all the strings attached and beauracy that goes with it. Look at the post office and DMV.
I would love to continue and believe you me I could go on for hours and hours talking (my fiance thinks it's very boring when I talk about mortgages and housing) I'm glad you guys listen :) but since I took last week off for vacation I am swamped with work.
there are also probably some spelling and gramatical mistakes in my post but I'm rushing so please don't send the internet spelling police after me.
Let's see what the next few weeks produce and we will all have a better idea what we are in for.
Posted by: Adam Dahill at September 8, 2008 4:23 PM
MacD: I am so bitter (though not a renter) that you beat me to posting re. Carl Pickens bio (he was for several years a mainstay of my fantasy football team).
Posted by: ProfRobert at September 8, 2008 6:21 PM
adam - the rates dropped today due to the speculative charge this gives to mbs demand. this does nothing for how difficult banks are making it to get a mortgage. you need some sustained follow through in the mbs market before lenders start originating in a normal fashion again. until then these new lower rates are only truly available to a select few.
Posted by: BrooklynLove at September 8, 2008 7:46 PM
I actually think we are back to normal or close. What went on over the past 3-4 years wasn't normal, it was maddness. With Fannie/Freddie under the gov. thumb I think we will see some easing up over the few months.
Posted by: Adam Dahill at September 9, 2008 9:36 AM
Up until yesterday, there was an unusually large spread between Treasury Notes and Mortgage Bonds due to the risk premium the market was pricing into Mortgage Bonds. Yields on Mortgage Bonds do not track the yields on Treasury securities, but based on historical ranges Mortgage Bonds were trading at higher yields, thus increasing the spread of rates offered between Treasuries and Mortgage Bonds. Yesterday's market action showed Traders removing this risk premium and buying Mortgage Bonds with both hands as they are now looking at the government as a backer and supporter of Mortgage Bonds. Ironically, through the most part of the day, there was actual selling of Treasuries while Mortgage Bonds were enjoying their biggest one day rally since mid-March
On a going forward basis this news also tells us that the newly invigorated confidence in Mortgage Bonds will once again attract foreign investors. Foreign investors have recently pulled away from buying our Bonds and should they step back in, which appears likely, this could help keep interest rates remain relatively low.
Posted by: Adam Dahill at September 9, 2008 11:56 AM
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Bati
added October 26, 2009 12:00 PM in Fort Greene
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