Federal Government to takeover F-Mac/Mae.

[outlaw2001it]

Both companies backed most loans just in case if there was a default (s***-load of them now), both companies could cover the cost to the original lender. What Both companies did was repackage the mortgage(s), and sold them as bonds. When all of the defaults came in...either company did not have enough money to cover the cost. The outcome is where we are now.

[Pexster]

BofA sure as heck doesn't need these agencies to write mortgages. Where is the free market? Why aren't huge financial institutions hanging on to mortgages they write? Seems like a business opportunity.

[outlaw2001it]

Look at it this way: I give you a loan for a house, and just in case you might default I have one of the two companies cover it...this way I get my money back just in case you do default. One of the two companies takes the mortgage, and resells it as a bond. They get the money, and reinvest it however they want to. So they are possibly getting rich right at that time, or over a period they will get more than their money back. You pay off your mortgage...the house is yours, I got my money in full, the two companies should have earned more (which I'm sure they did) from the mortgage that they sold as bonds, and the bond holder(s) got their money...everybody is happy. However the system failed them, and the rich got poorer, and everybody else got f'ed up the a$$...Vaseline not included.

[outlaw2001it]

Now it looks like Fannie Mae might be getting sued by the investors seeking class-action status that accuses the mortgage giant of misrepresenting the company's capital needs, court documents filed on Monday said.

Fannie Mae faces investor lawsuit | Reuters

[Pexster]

I understand that system, but those two agencies were never meant to buy every mortgage in the country. They were created to help with liquidity; not be the only source of it.

[Pexster]

Quote:

Originally Posted by outlaw2001it

Now it looks like Fannie Mae might be getting sued by the investors seeking class-action status that accuses the mortgage giant of misrepresenting the company's capital needs, court documents filed on Monday said.

Fannie Mae faces investor lawsuit | Reuters

Look for McGraw Hill (MHP), owner of Standard & Poors, and other ratings agencies to be on the hook, too.

[outlaw2001it]

I'm sure we'll see lawsuits for Freddie Mac, and other financial institutions really soon.

[outlaw2001it]

Quote:

Originally Posted by Pexster

I understand that system, but those two agencies were never meant to buy every mortgage in the country. They were created to help with liquidity; not be the only source of it.

I understand what you're saying, but however if they will cover my loan that I made to you to buy a house...I don't care what anybody thinks, and if they are willing to back it, that's not my problem. I'm getting my money if you default or not. They're making money off of my loan to you, and the person that bought the bonds on your mortgage is making money. In the end the rich get richer, and you could be without a house...the poorer get poorer.

[surreal]

Quote:

Originally Posted by Pexster

This is going to be HUGE next week. The fallout and controversy generated over this could easily overshadow election politics for a while. Of course, the candidates will have to add their 2c x 2 and spin to it, but the financial ramifications and fallout could easily overshadow that.

You ain't a kiddin' but no one is listening...

Global Nightmare: If Fannie And Freddie Had Failed : NPR

Quote:

Financial markets around the world got a little breathing room this week, after the U.S. government announced it would bail out the troubled mortgage agencies Fannie Mae and Freddie Mac.

An estimate in July from the Congressional Budget Office suggested the rescue could cost American taxpayers anywhere from zero to $100 billion — with the likeliest total being $25 billion.

That may sound like a lot, but economists argue that the cost of not saving Fannie and Freddie would have been far, far greater.

Together, the agencies hold loans of $5 trillion. That's the largest debt ever held by any private company in history. It's larger than any other country's debt, with the exception of that of the United States.

Allowing Fannie Mae and Freddie Mac to collapse would have been akin to letting Japan or the United Kingdom go bankrupt. Global economic leaders say even those unimaginable scenarios would have paled beside the fallout from a Fannie/Freddie implosion.

"The bankruptcy of Fannie and Freddie would have meant Armageddon," said Domenico Siniscalco, former finance minister of Italy. He added, "Meltdown of the financial system, the global financial system."

Siniscalco attended a conference for former finance ministers this week at the University of Virginia. Next to him was Tim Adams, a former U.S. Treasury undersecretary. Adams is not known for dramatic overstatements. Asked about a hypothetical collapse of Fannie Mae and Freddie Mac, he seemed at a loss for words. "Oh, wow, it would be..." his voice trailed off. "Credit markets would seize [up]."

Adams explained that many banks around the world own bonds from the mortgage agencies. If those bonds were suddenly worth far less, the banks would stop giving out loans of any kind. Consumers wouldn't be able to borrow money to buy homes, cars or basic goods. Entrepreneurs wouldn't be able to get financing for their ideas.

"If you can't borrow, you can't run your business," Adams said. "You can't go to school. You can't expand. And, therefore, the economy stops."


"It would certainly be the event of our lifetime," he said, "and probably be felt for a very long period of time." By long, he means decades — "at least."

<snip>

"It's a good week for India," said Yashwant Sinha. For years, he said, the U.S. and others told him that India's financial system is too backward, too closed off from global finance. "Every consultation told us we are not managing our affairs properly. And now everyone is looking at India as an example of cautious managing of the economy and cautious opening up."

Sinha and the others expressed agreement that the American economy still dominates the world by a great margin — just not as great a margin as a few months ago.

[SiliconJon]

The country that will be $10T in debt before the end of the year, accruing a direct additional debt of nearly $500B this year alone, and trading with a financial gap around $60B, is going to "budget" Fannie & Freddie.

Bloomberg.com: Exclusive