Tuesday, October 25, 2011

Really Scary Facts of the Day

1. "The GSEs (Fannie Mae and Freddie Mac) and FHA bought or guaranteed 95% of all new mortgages in fiscal year 2011! Mind blowing numbers compared to when 40% market share was seen as high in the early 2000s." 

2. "Here are the current GSE bailout numbers
  • Fannie Mae: $103.8 billion received from the Treasury
  • Freddie Mac: $65.2 billion received from the Treasury
  • Total: $169 billion in taxpayer money to bailout mortgage investors via the GSEs
And those numbers should be going up again next month. The Congressional Budget Office recently estimated that we are likely to see $51 billion more losses for the GSEs over the next 10 years."

~Reason Foundation

18 Comments:

At 10/25/2011 11:31 AM, Blogger VangelV said...

2. "Here are the current GSE bailout numbers:

* Fannie Mae: $103.8 billion received from the Treasury
* Freddie Mac: $65.2 billion received from the Treasury
* Total: $169 billion in taxpayer money to bailout mortgage investors via the GSEs

And those numbers should be going up again next month. The Congressional Budget Office recently estimated that we are likely to see $51 billion more losses for the GSEs over the next 10 years.


So much for the optimism about the improving housing market in the US. The government is still playing games by meddling in the markets.

 
At 10/25/2011 12:00 PM, Blogger Frozen in the North said...

if the GSE are doing 95% of all mortgage there's a message here. Either the pricing that the GSE will take is higher, or the banks have no appetite for new mortgage.

Funny enough I don't hear any bank bitching about this take over of their "natural" business -- my guess is that in the past the banks didn't hold onto the mortgages. The death of MBSs ensures that only the GSE want to play.

BTW the losses, is it on new mortgages or on the old business?

 
At 10/25/2011 12:10 PM, Blogger Benjamin said...

These numbers are scary? Ha-ha. I can turn your hair white.

How about $1 trillion every year and mounting for the defense-Homeland Security-VA megaplex?

That's $3,333 for every man woman and child in the USA. About $13k for a family of four. Every year. Last year, next year and one after that into the infinite future.

And Heritage Foundation says we should spend even more. These are "conservatives."

Other Western nations spend about one-third as much, and do not get invaded.

 
At 10/25/2011 2:11 PM, Blogger Marko said...

So, what would happen if they weren't buying these mortgages and if private sector banks would have to absorb these loses? Would that slow even further the pace of lending and make housing prices drop faster?

That could be a good thing, since the market might clear faster, but it also a scary thought. Something is really wrong - and government "help" seems to be making it worse and protracting it.

 
At 10/25/2011 3:13 PM, Blogger VangelV said...

The death of MBSs ensures that only the GSE want to play.

This is not true. Canada did not have the equivalent of the GSEs but still managed to have the banks provide mortgages to individuals.

 
At 10/25/2011 3:15 PM, Blogger VangelV said...

And Heritage Foundation says we should spend even more. These are "conservatives."

They are not true conservatives. Conservatives oppose foreign adventures abroad and reckless spending. They just call themselves conservatives as Bush did.

 
At 10/25/2011 3:17 PM, Blogger VangelV said...

So, what would happen if they weren't buying these mortgages and if private sector banks would have to absorb these loses? Would that slow even further the pace of lending and make housing prices drop faster?

What happens? Housing would be far more affordable than it is today.

 
At 10/25/2011 3:43 PM, Blogger Benjamin said...

Vange-

You may be a gold-nut but you have consistent principles. For that, I salute you.

 
At 10/25/2011 4:48 PM, Blogger Hydra said...

This is not true. Canada did not have the equivalent of the GSEs but still managed to have the banks provide mortgages to individuals.

================================

Canadian homeowners are much older on average than American Homeowners. Individuals in Canada appear to be able to get loans only after saving most of their life to meet higher down pament requirements.

The fact that people do get loans in Canada is insufficient to suggest that their system is superior to ours.

After all, Canadians do get healthcare, too, and I don't suppose you want to import the Canadian system for that.

 
At 10/25/2011 4:49 PM, Blogger Hydra said...

What happens? Housing would be far more affordable than it is today.

==============================

Your Canadian example does not support that conclusion.

 
At 10/25/2011 7:14 PM, Blogger Marko said...

"They are not true conservatives. Conservatives oppose foreign adventures abroad and reckless spending. They just call themselves conservatives as Bush did."

They are a different kind of conservative - Heritage is socially or culturally conservative. That is different from fiscally conservative. These two types of conservatives seem to be overlapping less and less.

 
At 10/25/2011 8:19 PM, Blogger Hydra said...

The social Conservatives and the conservaionists / preservationists are promoting religions, not governance.

 
At 10/25/2011 9:30 PM, Blogger juandos said...

"The social Conservatives and the conservaionists / preservationists are promoting religions, not governance"...

Well that's a seriously blank statement rife with delusional nonsense...

Now these are some seriously scary facts any day...

 
At 10/25/2011 10:09 PM, Blogger VangelV said...

I am not a 'gold nut.' I simply do not believe that anyone should have a monopoly that gives them the right to create purchasing power out of thin air. I do not call for a gold standard to be imposed. I simply call for the legal tender laws to be abolished so that people can choose their media of exchange. If 99.99% of the people choose to keep using fiat paper that would be fine with me. All I care about is having a choice.

 
At 10/25/2011 10:15 PM, Blogger VangelV said...

Canadian homeowners are much older on average than American Homeowners. Individuals in Canada appear to be able to get loans only after saving most of their life to meet higher down pament requirements.

You are right about one thing. In Canada it is harder to get a loan if you have no skin in the game. The banks want a substantial down payment, which proves that the people getting the loans have the discipline to save and act in a fiscally responsible manner. If the buyers don't have enough for a deposit the banks want the government to guarantee the mortgages because they will not risk shareholder equity.

The fact that people do get loans in Canada is insufficient to suggest that their system is superior to ours.

I am not saying that the Canadian system is very good, only that it is superior to the GSE based model that is used in the US. When you have to be responsible and cannot walk away from lousy decisions you have a tendency to act rationally. Canada does have a bubble that the government has created by lowering rates and guaranteeing some loans. I do expect a decline of 30% or so in many areas. But I do not expect nearly the same level of carnage and stupidity as in the US.

After all, Canadians do get healthcare, too, and I don't suppose you want to import the Canadian system for that.

No, I do not. The Canadian system is not all that good. But let me point out that the US has adopted some of its worst elements already and that the US system is far more constrained by idiotic regulations that drive up prices for Americans.

 
At 10/25/2011 10:18 PM, Blogger VangelV said...

Your Canadian example does not support that conclusion.

Logic does. Without the GSEs propping up the market prices in the US would collapse because the total debt level is so high for Americans while equity levels are so low. In Canada the employment levels, higher deposits, and inability to walk away is preventing an all out collapse.

 
At 10/25/2011 10:20 PM, Blogger VangelV said...

They are a different kind of conservative - Heritage is socially or culturally conservative. That is different from fiscally conservative. These two types of conservatives seem to be overlapping less and less.

When I think of American Conservatives I think of Taft and the Old Right, not the neocons that dominate the movement today. They just use the label 'conservative.' It is no more valid for them than it is for those that use the label 'liberal.'

 
At 10/26/2011 9:23 AM, Blogger morganovich said...

frozen-

"The death of MBSs ensures that only the GSE want to play."

um, no. that's not even slightly correct.

first off, most of the loans that went into the MBS's either came from the the GSE's or were guaranteed by them. how do you think they got AAA ratings?

the whole GSE structure was a scam to take garbage loans and turn them into triple A by whoring out the US government's credit rating.

second, the reason the banks won;t play in mortgages is that they cannot compete with F+F who have a zero cost of capital.

this is a de facto nationalizing of the mortgage industry. i don;t know what else you could even plausibly call a 95% takeover.

regarding canada, loans are much harder to get, down payments are much higher, and they are FULL RECOURSE. you can't just hand over t5he keys and walk away.

this makes the canadians much more careful.

if you want to see where the US system went off the rails, it was when the GSE's first upped their mandate and had to make 55% of loans to sub-prime than also slashed their standards and allowed liar loans and zero down payments. in 2000 the average down payment for a GSE loan was 15-20%.

by 2006 it had dropped to under 3%.

you want to find the source of the bubble and it's disastrous over extension of credit, that was it.

going from 15% to 3% down is a 5X increase in leverage.

i think about half their loans were zero down and many of those were IO's. that's a horrific amount of leverage.

 

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