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| User Info | Barrons Cover- Is Fannie Mae Toast? in forum [NotSoBreaking] | |||
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Financeguy Posts: 4946 Incept: 2007-08-10 
Charlotte 
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Barrons is usually more rosy than this except for Alen Ableson. Many times a Barrons piece will move markets.Quote:But, if the truth be known, a considerable portion of Fannie's losses also came from speculative forays into higher-yielding but riskier mortgage products like subprime, Alt-A (a category between subprime and prime in credit quality) and dicey mortgages requiring monthly payments of interest only or less. For example, Fannie's $314 billion of Alt-A -- often called liar loans because borrowers provide little documentation -- accounted for 31.4% of the company's credit losses while making up just 11.9% of its $2.5 trillion single-family-home credit book. Fannie was clearly looking for love -- and market share -- in some of the wrong places. http://online.barrons.com/article/SB1204.... ---------- "Granted, if you are not into Barbara Streisand and creme brulee, South Beach could be a tad lonely." Eleua
2008-03-08 15:39:51
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Marginnayan Posts: 10460 Incept: 2007-06-27
Dallas Forth Worth Metro, Texas
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Fast Money Karen bought FnM in the stock market mini minee massacre of last 2 days. Mentioned that some one paying almost $7 for a 08-09 leap puts on FnM betting that the stock goes to almost zero is just ridiculus. FnM closed green on Friday. ---------- "The whole purpose of this ****ing US Fed is to make Banksters richer and Midle Class Americans poorer with each passing day. No More. Abolish the US Fed right here, right now. - Me Last modified:
2008-03-08 15:59:25 by marginnayan
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Lakeshorelady Posts: 5402 Incept: 2007-08-17 
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Quote:Alt A (a category between subprime and prime in credit quality) This defintion of Alt A is becoming more and more prevalent and is not accurate. It leads one to believe that ALT A loans have lower credit characteristics than prime and IMHO leads to an overall false sense of confidence placed in prime loans. In reality, the majority of the Alt A market has a lower document level relative to the capacity characteristic of lending with credit characteristics similiar to prime. There are 3 C's in lending, credit, collateral and capacity (income) Credit and character are usually interchangeable with the same attributes assigned to both ---------- "Like all other idealisms, patriotism varies from a noble devotion to a moral lunacy." - W.R. Inge Last modified:
2008-03-08 16:00:00 by lakeshorelady
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Marginnayan Posts: 10460 Incept: 2007-06-27
Dallas Forth Worth Metro, Texas
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Quote:Credit and character are usually interchangeable with the same attributes assigned to both What a play on words & definitions ? You might have to spend who knows how much time before knowing what it actually means and by that time it may be too late. Use one that suits your trading book and then pump it into the news & media channels with no sight in end to it. ---------- "The whole purpose of this ****ing US Fed is to make Banksters richer and Midle Class Americans poorer with each passing day. No More. Abolish the US Fed right here, right now. - Me Last modified:
2008-03-08 16:09:34 by marginnayan
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Grifter Posts: 237 Incept: 2008-02-07 USA
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Fannie Mae named a new internal auditor Friday, interesting: http://biz.yahoo.com/ap/080307/fannie_ma.... With the number of loans FNM has on the books, even a $14B charge seems a bit low, don't you think?
2008-03-08 22:38:26
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Perseid Posts: 1615 Incept: 2008-01-28 I'm Packing...
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Grifter wrote..Fannie Mae named a new internal auditor Friday, interesting Wasn't there a rumor a couple days ago about one of the GSE's (Freddie?) falling out with their auditor and a possible major write-down? Perhaps this was the one, although FRE comes to mind. Why one earth would FNM need a new auditor ? Next week is going to be real interesting.
2008-03-09 01:14:52
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Financeguy Posts: 4946 Incept: 2007-08-10
Charlotte
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Head of internal audit is different than the "independent auditors". The GSE's are revolving doors because they are really screwed up. I have heard from folks in the industry that they spent over a Billion dollars on external consultants trying to restate earnings. They apparently can't hire and retain good folks for the most part and rely heavily on bodies from consulting firms.
---------- "Granted, if you are not into Barbara Streisand and creme brulee, South Beach could be a tad lonely." Eleua
2008-03-09 01:30:28
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Alex2008 Posts: 725 Incept: 2008-01-06
Banned
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"Yet using conservative default rates of 40% on its $133 billion subprime book, 12.5% on its $314 billion of Alt-A mortgages and 4% on its remaining $2 trillion of prime home mortgages, Fannie could well be facing cumulative credit losses of over $50 billion. That's after assuming Fannie will realize recoveries of 60% on its subprime and Alt-A loans and 70% on its prime loans. Should Fannie founder over the next couple of years, the government would have no choice but to step in and back all of its debt and guarantee obligations. Too much of the paper is owned by our major creditors, such as China and Japan." I wouldn't be to sure about the conclusion that .gov will bailout the GSEs. Last week Treasury refused to give an explicit guarantee. If push comes to shove .gov would rather let Japan and China eat FNM and FRE paper than eat the garbage itself.
2008-03-09 03:12:14
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Aliveh Posts: 2610 Incept: 2008-01-18
Los Angeles
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That was awesome when Cramer flipped out on Stop Trading Friday and demanded that Paulson guarantee GSE paper. 2 days after the Fed explicitly said it would not guarantee GSE paper. I do note however that under its charter the Fed is authorized to buy GSE paper as part of its OMO. This would be highly unusual though and I could see it as a possible desperation move after things get much worse.
2008-03-09 03:28:20
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Gen_maximus57 Posts: 2263 Incept: 2007-09-03
Miami
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The GSE will purchase agency paper when the democrats control the white house
---------- Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper.
2008-03-09 03:31:26
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Alex2008 Posts: 725 Incept: 2008-01-06
Banned
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And you think the moment of truth will wait until the President is sworn in next January?
2008-03-09 03:39:41
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Perseid Posts: 1615 Incept: 2008-01-28 I'm Packing...
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This whole mess is going to crash long before next January. What the democrats would or would not do is going to be irrelevant.
2008-03-09 12:25:12
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Theedge111 Posts: 3695 Incept: 2007-08-07
Baltimore
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ALt-A's are considered to be as bad as subprime by some analysts. I think as the peculators get pressured the foreclosure rates on these loans will be almost as high as subprime. the Alt-A loan was the speculator loan. No doc and the specs loved them. This is the next big shoe to drop. ---------- P.J. O'Rourke, writing in "Eat The Rich" (1998), observed that: "Economics is an entire scientific discipline of not knowing what you're talking about." The only quibble may be with the "scientific" part.
2008-03-09 13:12:49
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Lakeshorelady Posts: 5402 Incept: 2007-08-17
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Theedge, Agreed. But these analysts and mortgage paper investors HAVE to realize that Alt A has/is the same credit profile as Prime -- that Alt A isn't a credit designation, it is a doc designation. Thus it is the level of documentation in a loan that correlates with performance/default, not the FICO. If not, investors will see increased default numbers in prime and wonder what the hell happened -- it will further frighten them from the investor market when there are good solid doc loans still in that market. This will happen because "Fast & Easy" is considered prime (can be both conforming or nonconforming). Fast&Easy wasn't/isn't considered Alt A. It was/is bought, classified and sold to and by Fannie as Prime -- "Fast & Easy" prime loans are really Alt A loans in a Mozillo made Halloween costume. That will scare the living hell out of the prime borrower's paper buyers as long as Fast&Easy/Streamline/etc programs continue to exist. We can thank Mozillo's pressure on Fannie for both getting the "Fast&Easy" program into Fannie and the mass acceptance of it being "prime and conforming" and/or "prime and nonconforming" in the GSE's/major banks/investors that followed -- Damn, Mozillo was good at his game, who else could engineer slipping a completely no doc loan with an AVM (automated appraisal) into the conforming prime market and having it being recognized as being one of the same as a loan with 2 yrs W2's, a months worth of paychecks, proof of reserves, a full appraisal, bank statements, etc... When the whole what "Fast&Easy" really is realization is made, more and more restrictions will have to be placed as the market will freeze once the big buyers of the paper get it. There's a damn good reason everyone in the know called it "Fast&Sleazy" and it "ain't" a pretty one. ---------- "Like all other idealisms, patriotism varies from a noble devotion to a moral lunacy." - W.R. Inge Last modified:
2008-03-09 15:11:31 by lakeshorelady
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Genesis Posts: 71432 Incept: 2007-06-26 
KD^2
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Prime's True Definition: 30 year fixed 36% DTI (back end) 20% down, hard money (seasoned) No piggybacks Six months of hard money (seasoned) reserves in liquid assets Unfortunately, Fannie and Freddie paper buyers are going to find out that a huge proportion of their written paper over the last five years bears as much resemblance to this standard as a $5 Hooker does to a Nun. They're both women, but there the similarities stop. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-03-09 15:33:21
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Theedge111 Posts: 3695 Incept: 2007-08-07
Baltimore
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Lakeshore Agreed. That is Thornburg's biggest problem. They started to dabble in a little alt-A and they are losing their company because of it. Thornburg's AAA debt is good stuff IMO and should be sold as AAA. They know that and they were hoping the credit markets would get back to normal so they could sell their pools of debt for what they are worth. When things started free falling and this market came to a complete halt they got toasted. Te good companies are being thrown out with the bad. A company like Thornburg shouldn't be going under. thats the sad part of all of this ****. Many people will be hurt by ******* companies like Countrywide that ****ed up everything like you so eloquently described above. ---------- P.J. O'Rourke, writing in "Eat The Rich" (1998), observed that: "Economics is an entire scientific discipline of not knowing what you're talking about." The only quibble may be with the "scientific" part.
2008-03-09 15:53:54
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Lakeshorelady Posts: 5402 Incept: 2007-08-17
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Quote:
LMAO on just how true this statement is-- You nailed in Karl All those "Fast&Sleazy" loans STATE on paper (with no verification needed or done at all per the guidelines) that they fit the true definition of prime as Karl has defined. They weren't done "Fast&Easy" in the vast majority of cases becuase it was quicker and easier. In fact the "easier" portion was really just one fax way and there wasn't any difference in closing time (the "fast" part) with a motivated borrower. They went that way because there wasn't anything to fax. I just laugh when I recall all of the "What do I have to do with the numbers to get this loan to have an accept with just an AVM?" AFTER AN APPRAISAL was done questions. Prime is going to blow, not because the loans are bad, but because of all the bad loans that in there that had no business being in there in the first place. Once Again, yet another TY to Angelo Mozillo ---------- "Like all other idealisms, patriotism varies from a noble devotion to a moral lunacy." - W.R. Inge Last modified:
2008-03-09 17:01:23 by lakeshorelady
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Theedge111 Posts: 3695 Incept: 2007-08-07
Baltimore
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I agree Lake The babies will be thrown out with the bath water. KD Nice...so true ---------- P.J. O'Rourke, writing in "Eat The Rich" (1998), observed that: "Economics is an entire scientific discipline of not knowing what you're talking about." The only quibble may be with the "scientific" part.
2008-03-09 18:06:57
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Boz_inc Posts: 274 Incept: 2008-01-20
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KD Wrote: <<<<Prime's True Definition: 30 year fixed 36% DTI (back end) 20% down, hard money (seasoned) No piggybacks Six months of hard money (seasoned) reserves in liquid assets>>>>> 20% down, in what market? 20% down today means your LTV will be over 80% as prices continue to drop. Maybe is should be more like 25-40% down depending on your market. Equity, is a large piece on the definition of prime. Hypothetically, if FNM or FRE go TU, the bank sits on this paper, correct? (Future paper originated) Last modified:
2008-03-09 22:34:59 by boz_inc
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Gowild00 Posts: 87 Incept: 2008-02-26 edina, mn
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foreign central banks hold almost $900 billion of agency paper - talk about tough to swallow....
2008-03-09 22:39:08
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