[Wavgbtif]

NPR and ProPublica released an explosive report Monday that found government-owned mortgage giant Freddie Mac betting against the very homeowners it is supposed to help. According to the news article, the investment division of Freddie Mac (or as Henry calls it, Freddie's "gambling desk") placed billions of dollars of bets against homeowners who were trying to refinance their mortgages at lower rates.

According to NPR/ProPublica's review of public documents, Freddie Mac invested in securities called "inverse floaters," which receive all the interest payments from specified mortgage-backed securities. "If lots of people 'pre-pay' their old loans and refinance into new, cheaper ones, then Freddie Mac starts to lose money," ProPublica's Jesse Eisinger and NPR's Chris Arnold explain. "If people can't refinance, then Freddie wins because it continues to receive that flow of older, higher interest payments."

Although Freddie Mac's bets are legal, they're highly offensive. Rightly or not, many Americans blame Freddie Mac and Fannie Mae -- which was not mentioned in the NPR/ProPublica report -- for the housing boom and subsequent bust. Nearly all Americans would agree these companies should not be focused on generating profits, now that they are officially wards of the state and are using taxpayer dollars to make these bets, as Aaron and Henry discuss in the accompanying video.

Freddie Mac plays a significant role in determining mortgage rates and is one of the "gatekeepers" with the power to decide whether a homeowner can refinance at a lower rate. If homeowners can reduce their mortgage payments, then Freddie Mac loses money. Hence the conflict of interest and the concern Freddie has been turning down refi requests in order to benefit its proprietary trades.

Freddie Mac Spokesman Michael Cosgrove provided this response to the NPR/ProPublica report:

"Freddie Mac is actively supporting efforts for borrowers to realize the benefits of refinancing their mortgages to lower rates. During the first three quarters of 2011, we refinanced more than $170 billion in mortgages, helping nearly 835,000 borrowers save an average of $2,500 in interest payments during the next year. Refinancing accounted for more than 70 percent of our loan purchases during the first nine months of 2011. We remain committed to reducing our retained portfolio and appropriately managing its risks. Our retained portfolio has declined by about $200 billion since its peak, and at the end of 2011 was more than $60 billion below the cap required by the U.S. Treasury."

Washington stepped in to shore up the balance sheets of the troubled mortgage lenders in 2008, spending $169 billion at the height of the housing market collapse, according to the NPR/ProPublica report. Any risky bets Freddie makes will technically affect all taxpayers. Freddie Mac has asserted its investment arm, the division that places bets against homeowners via complex mortgage securities, is "walled off" from the mortgage-lending unit and other Freddie Mac personnel. The government mortgage buyers guarantee more than half of all the $10.3 trillion in outstanding U.S. home loans, as reported by the Wall Street Journal.

Many economists and policymakers say the number of foreclosures will drop if Americans are able to refinance their high-interest rates. For the week ending Jan. 26, the rate on the 30-year-fixed mortgage averaged 3.98 percent. President Obama reiterated his administration's commitment to helping homeowners in last week's State of the Union.

"I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates," Obama said. "No more red tape. No more runaround from the banks." (See: Taken to Task: Getting a Mortgage Shouldn't Be This Hard)

Both companies have been in the hot seat before over payments to their CEOs and top executives. The salaries for Michael Williams and Charles Haldeman Jr., the departing CEOs of Freddie Mac and Fannie Mae, were expected to be as high as $6 million each last year although both companies reported deep financial losses. California has filed a suit against Freddie and Fannie last December, asking the firms to provide extensive rejoinders about the properties they own and foreclosed in the state. The Securities and Exchange Commission has brought civil fraud charges against former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron, stating that the mortgage giants were untruthful about their subprime exposure.

Video at link:

http://finance.yahoo.com/blogs/daily...164015828.html

[FailiaFelay]

TPTB continue in their plan to abolish private property...

[FailiaFelay]

New media telling you it's OK to default...
Do it for Freddie!!

What Happens When You Walk Away From Your Home?


As banks start to work through their backlog of distressed properties, the New York Federal Reserve estimates that 3.6 million foreclosures will take place during the next couple of years....

There's a moral component to that decision, of course. People naturally feel embarrassed about breaking a contract and not paying their bills; no one wants to be branded a deadbeat. But remember that companies default on their obligations when it makes financial sense for them to do so, via the bankruptcy process. Even the Mortgage Bankers Association itself, in a flourish of irony, arranged for a short sale of its Washington headquarters.

It's not personal; it's business. So think of strategic default as a business decision, and do a cold-eyed cost-benefit analysis of whether it makes sense for you, advises Carl Archer, an attorney with Maselli Warren in Princeton, New Jersey.

"People think it reflects on their integrity, and say 'I wasn't raised this way,'" said Archer. "But the more businesslike attitude is to say that there's a contract, there are penalties for violating that contract, and sometimes it just makes financial sense to break it."

The penalties largely revolve around your credit record, which admittedly gets blown up in the near-term. For a few years you can likely forget about qualifying for a mortgage or a car loan. When lenders are ready to take a chance on you again, you'll have to pay for the privilege, with stiff interest rates due to your default history....

http://finance.yahoo.com/news/what-h...our-home-.html

[mincbiori]

who gives a rip about credit?

That means you will have to pay cash for purc hases

A strategic default could be the best thing that could happen

[FailiaFelay]

Fed helping to eliminate private home ownership... (American families should pay rent)

The Federal Reserve recently came out with an unprecedented analysis directed to the Committee on Financial Services regarding various methods to improving the housing market....

One of the big recommendations centers on creating a “REO to rental” program by facilitating bulk sales to large investors. Ironically the Federal Reserve by bailing out select banks has allowed home values to remain inflated thus causing this backup in inventory to emerge in the first place....

One of the options presented includes “REO holders to rent” properties out directly. But as we have seen with the massive shadow inventory, banks don’t seem keen on doing this. In fact, it would appear banks would rather wait and see if a nice bailout is coming their way and simply ignore non-payment on homes or taking action on existing inventory....

Another underwhelming option presented in the paper is subsidizing loans to bulk REO buyers. In subsidizing, they mean the taxpayer is going to help fund these deep pocket investors to do something the market will do anyways. The reasons prices are still too high in some markets is because first, the system allowed banks to suspend mark-to-market and allowed these banks to use accounting chicanery....

Almost a century of housing programs in the US and there is a reason that we do not have a REO bulk sale program. Yet here we go again with the Fed subsidizing big players to keep prices inflated....

The premise is wrong and subsidizing here makes winners only out of key investors and banks at the expense of the public....

Instead of focusing on these key topics, the Fed once again looks at subsidizing banks instead of correcting the errors of what led us into this mess....

http://www.doctorhousingbubble.com/r...-reo-business/

[LeslieMoran]

my bank sold my loan to the f's last year right after i bought. i'm currently refinancing it (saving well over a point). we have about 50% equity in the place, no late payments, credit scores in the upper 700's, tons of paid off collateral items, the house has gone UP $20,00 in value (yeah, i know, right?) and it's a NIGHTMARE getting it done. the f's keep throwing up page after page of things that need to be investigated, filled out, etc. i'd be completely amazed that anyone with even 1 problem could get it done. i have 0 problems, and it's going on a month for me. it should have been done in one day. it's almost like they don't want me to do it.

[irresseni]

my bank sold my loan to the f's last year right after i bought. i'm currently refinancing it (saving well over a point). we have about 50% equity in the place, no late payments, credit scores in the upper 700's, tons of paid off collateral items, the house has gone UP $20,00 in value (yeah, i know, right?) and it's a NIGHTMARE getting it done. the f's keep throwing up page after page of things that need to be investigated, filled out, etc. i'd be completely amazed that anyone with even 1 problem could get it done. i have 0 problems, and it's going on a month for me. it should have been done in one day. it's almost like they don't want me to do it.

Yep! We just refi'd with Wells Fargo from a 30y fixed at 5.5% to a 15 year fixed at 3.6%. It took about a month and they put us through the ringer. My wife and I have a credit rating in the high 700s too. They wanted every document under the sun: W2, tax returns, corporate tax returns, bank statements etc. I couldn't help but feel that they were determined to thwart us and hope we give up the process. I told my wife: fuckit, we will do this dammit! I starting calling the refi officer daily, and emailing, and politely breaking his balls: "Do you need anything else? Are you sure? I can FAX it, email it, FEDEX it - are you sure you have everything? Bla bla bla." Finally they sent a bagel eater to the house and in an hour the documents were signed and the deal done!

[LeslieMoran]

the final straw for me was when they questioned the appraisal. i did a ton of work to the place, and the appraisal came in 20k higher than a year ago.

OH NO!

they started down the road of questioning the appraiser and "we might need to do another one because this is not normal for the market." i pointed out that the appraiser i used was the one they picked, and that HE WAS ALSO THE SAME, EXACT GUY THEY HAD APPRAISE IT WHEN I BOUGHT IT.

i starting suggesting i might have to talk to my lawyer buddies if they didn't get to work, and then it was magically fixed.

rat bastards.

[irresseni]

the final straw for me was when they questioned the appraisal. i did a ton of work to the place, and the appraisal came in 20k higher than a year ago.

OH NO!

they started down the road of questioning the appraiser and "we might need to do another one because this is not normal for the market." i pointed out that the appraiser i used was the one they picked, and that HE WAS ALSO THE SAME, EXACT GUY THEY HAD APPRAISE IT WHEN I BOUGHT IT.

i starting suggesting i might have to talk to my lawyer buddies if they didn't get to work, and then it was magically fixed.

rat bastards.

Ha ha ha - similar problems here too! The Appraiser shows up one day. My wife gives him the grand tour, showing him all the additions and upgrades we have done over the last 8 years: completely new kitchen, three bathrooms redone, totally finished bonus room over garage, in ground pool and patio, etc etc etc. The idiot didn't take notes, just listened. A couple of weeks later we get the appraisal for $600K (we paid $649K in 2003). The appraisal is completely wrong with half the square footage and describes the house as we originally bought it (in 2003). My wife was miffed. I told her I didn't care, since we had over 60% equity even at that low appraisal - but I wanted it fixed because I didn't want that low price as a precendent/comp if we sold the house one day. She called the refi officer and tore him a new and improved asshole (politely). The appraisal was fixed and the price adjusted up to $900K. Frankly, I don't think the bank gives a shit - this whole refi process is a churning game for them to make some fees.

[Zenunlild]

the Appraiser are looking out for there selfs this time around , they made the mess last time jacking up the prices of homes so people could get more money to take trip an what nots . we also refi are loan and the next day Freddie own the loan it pissed me off

[FailiaFelay]

The Bernank presses forward with removal of private ownership & pushes REO to rental...

Bernank testifies: many potentially creditworthy homebuyers cannot obtain mortgages.
Bernank solution: REO-to-rental programs appear to have some potential for success.

Yay for banks!!! we estimate that an additional 1 million foreclosed properties could be added to the REO held by banks, guarantors, and servicers in each of the next few years.

http://www.federalreserve.gov/newsev...e20110210a.htm

Chairman Ben S. Bernanke
At the 2012 National Association of Homebuilders International Builders' Show, Orlando, Florida
February 10, 2012
Housing Markets in Transition

Moreover, a very large number of additional homes are poised to come on the owner-occupied market. In each of the past few years, roughly 2 million homes have entered the foreclosure process, and many of these homes have been put up for sale, crowding out much of the need for new building. Looking ahead, the relatively high rate of foreclosures is likely to continue for a while, putting additional homes on the market and dislocating families and disrupting communities in the process.

[cestsennY]

To add to ximmy's post above.

Ben Bernanke FTMFW Quote Of The Day

Submitted by Tyler Durden on 02/10/2012 - 12:35 Ben Bernanke Ben Bernanke And the winner is...

• BERNANKE: HOUSING MAY NO LONGER BE VIEWED AS SECURE INVESTMENT

That's right. He just said that. And with that, a Lewis Black moment is coming on... Damn, he is trying to change 70 years of propaganda with that statement.

[FailiaFelay]

Housing agency to take bids to turn foreclosures into rentals

That that suckers!
robbing from the poor, giving to the rich...

The Federal Housing Finance Agency announced Monday that it will begin taking bids from investors to buy clusters of foreclosed properties and turn them into rentals.

The agency, which oversees government-backed mortgage giants Fannie Mae and Freddie Mac, said the pilot bulk sale program would focus initially on some of the country’s hardest-hit cities — Atlanta, Chicago, Las Vegas, Los Angeles and Phoenix, as well as parts of Florida.

Last summer, the FHFA, along with the Treasury Department and the Department of Housing and Urban Development, solicited outside input for creative ways to help answer a perplexing question: How could the government rid itself of the glut of foreclosed properties it now owns in a way that nudges the housing market toward recovery?

Fannie and Freddie have taken possession of hundreds of thousands of foreclosures throughout the country since the housing bust. But selling those homes at decent prices in an abysmal market has proven tough.

This is the best way to keep housing prices propped up in a great depression

http://www.washingtonpost.com/busine...ZeR_story.html

[timgillmoreeztf]

yep, here comes the resurection of the slum lords.