Ginnie Mae heading to $1 trillion in government backed mortgage debt by 2010

July 22, 2009 by · 1 Comment
Filed under: Policy News 

Can you hear that?  You may ask what your listening for, it sounds like a massive black-hole that is sucking down taxpayer dollars.  If I am reading this article right it translates into, Ginnie Mae is the next GSE that is going to get the big-old bailout from Uncle Sam.  It literally says that are not changing their lending requirements and their is no credit score requirement.  That sounds like the same recipe that got the other GSEs’ in trouble in the first place.   Icing on the cake will be when we see Ginnie Mae’s maximum loan size that make the loan a “conforming”, increased so that more borrowers qualify.  We will need to watch this closely.

News (Bloomberg):

Mortgage bonds guaranteed by U.S. agency Ginnie Mae will probably swell to $1 trillion by the end of 2010 because borrowers with low down payments or credit scores can only qualify for government-insured loans, Bank of America Corp. analysts said.

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Archive 1999 – Fannie Mae Eases Credit To Aid Mortgage Lending

March 3, 2009 by · Leave a Comment
Filed under: Opinion 

My friend researched and found this article from the NY Times dated September, 30th 1999. After reading this, it is hard to not see how this would turn bad eventually with these “subprime” borrowers getting charged higher interest rates for their home loans.   By definition, if you are “subprime” you have bad credit, I would even assume that their employment might not be of the highest income so why would a lender to get around that risk, charge more interest?  Sounds like a losing game unless you had some way to not hold that toxic paper, which we all know now as “securitization”. Separating the lender from the borrower was the worst possible idea, with money being made in fees upfront, there was really no incentive to make good loans that a bank would traditionally hold on their balances sheet for the duration of the loan.

Archive Story:

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

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Fannie Mae and Freddie Mac to buy $40 billion a month of bad assets

October 10, 2008 by · 1 Comment
Filed under: Real Estate News 

Looks like they will be using these two GSEs to purchase these bad mortgages to help stem our real estate crisis.  At this point we are so far over the cliff that it really doesn’t matter what they do.  We are headed for a severe contraction in the world economy and the era of easy credit has come to an end for the foreseeable future.

News Piece:

Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of under-performing mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan.

Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury’s $700 billion Troubled Asset Relief Program.

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Government Sponsored Enterprise Credit Facility (GSECF) created to bailout GSEs & FHLB

September 7, 2008 by · Leave a Comment
Filed under: Economic News 

The U.S. Treasury announced via a press conference hosted by Henry Paulson on Sunday afternoon. They laid out a four point plan to rescue the beleaguered GSEs’ Fannie, Freddie and FHLB institutions. Here is a link to the Bloomberg coverage and a link to the video on the press conference.

Near the end they discussed the new credit facility (Government Sponsored Enterprise Credit Facility (GSECF))that was created to give liquidity to these entities. Here is the link to the PDF on the new credit facilities and their intended operations.

U.S. Treasury to Bring Fannie Mae, Freddie Mac GSEs Under Government Control

September 5, 2008 by · Leave a Comment
Filed under: Economic News 

After many rumors, this one comes true. We are bailing out our two largest GSEs Freddie and Fannie. After the market close on Friday the Treasury unveiled their plans to bring the two GSEs into government conservator-ship. Both CEOs have been removed from the jobs as they come under public control.

The New Yorks Times reported that in the scenario the common and preferred shareholders might lose sustaintial value in their investments. It will be interesting to see if they don’t actually bail out those shareholders as well. Any way you cut it this nationalization will be inflationary over the long run.


Treasury Secretary Henry Paulson is preparing to announce plans to bring Fannie Mae and Freddie Mac under government control, seeking to halt the crisis of confidence in the companies that make up almost half the U.S. mortgage market.

Paulson met with Fannie Mae Chief Executive Officer Daniel Mudd and Freddie Mac CEO Richard Syron yesterday to brief them on the decision to put the companies into a conservatorship, where they would be removed from their jobs, according to a person briefed on the discussions. A public announcement is expected this weekend, the person said.

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