From an article today on Marketwatch.
"Similarly, a private economist said Wednesday that the Fed will have to do much more to help the troubled housing market.
"My suggestion is for the Fed to partner with the Treasury to lift the cap on jumbo mortgages so that they can be bought by Freddie and Fannie Mae. This would keep the prime mortgage market liquid," said Rajeev Dhawan, director of the Economic Forecasting Center at the J. Mack Robinson College of Business at Georgia State University. End of Story "
Thursday, August 23, 2007
Wednesday, August 22, 2007
Senators chime in also...
This is a report on Dow Jones Newswires where the Senate is starting to wake up and request exactly what I noted in my letter: Raise the individual loan caps...
By Damian Paletta
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--House Financial Services Committee Chairman Barney Frank, D-Mass., urged the Senate on Friday to pass legislation that would allow Fannie Mae (FNM) and Freddie Mac (FRE) to purchase even more expensive mortgages than a bill Frank steered through the House earlier this year permitted.
"It now is clear we underestimated in the House bill how far we should raise the conforming loan limit, and the current crises in the mortgage market demonstrate we should raise it to a higher level." Frank said in a press statement. "I urge the Senate to make this a priority as part of GSE reform, because we now have the opportunity to help homeowners get access to needed credit by allowing Fannie Mae and Freddie Mac to play a larger role."
Fannie Mae and Freddie Mac are only allowed to purchase mortgages on the secondary market known as "conforming loans," and these loans cannot be higher than the conforming loan limit, which is presently at $417,000. The House-passed bill would allow government-sponsored enterprises to purchase more expensive mortgages in states where the cost of housing is higher, but Frank and Rep. Gary Miller, R-Calif., said Friday that the companies should be able to buy even more expensive loans.
Many of the current problems in the housing and credit markets are with subprime mortgages and "jumbo" loans that the GSEs aren't permitted to buy.
If the Senate passed a bill raising the conforming loan limit, House and Senate negotiators could agree on compromise language before the bill is sent to the White House.
August 17, 2007 15:20 ET (19:20 GMT)
By Damian Paletta
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--House Financial Services Committee Chairman Barney Frank, D-Mass., urged the Senate on Friday to pass legislation that would allow Fannie Mae (FNM) and Freddie Mac (FRE) to purchase even more expensive mortgages than a bill Frank steered through the House earlier this year permitted.
"It now is clear we underestimated in the House bill how far we should raise the conforming loan limit, and the current crises in the mortgage market demonstrate we should raise it to a higher level." Frank said in a press statement. "I urge the Senate to make this a priority as part of GSE reform, because we now have the opportunity to help homeowners get access to needed credit by allowing Fannie Mae and Freddie Mac to play a larger role."
Fannie Mae and Freddie Mac are only allowed to purchase mortgages on the secondary market known as "conforming loans," and these loans cannot be higher than the conforming loan limit, which is presently at $417,000. The House-passed bill would allow government-sponsored enterprises to purchase more expensive mortgages in states where the cost of housing is higher, but Frank and Rep. Gary Miller, R-Calif., said Friday that the companies should be able to buy even more expensive loans.
Many of the current problems in the housing and credit markets are with subprime mortgages and "jumbo" loans that the GSEs aren't permitted to buy.
If the Senate passed a bill raising the conforming loan limit, House and Senate negotiators could agree on compromise language before the bill is sent to the White House.
August 17, 2007 15:20 ET (19:20 GMT)
Now the Officials Chime in..
This note from a "real" researcher on how much money it will take to "stabilize" the mortgage markets. Not far from my proposal eh?
By Lingling Wei and Kevin Kingsbury
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--It may take a long time for investors to start bidding for mortgages again.
In recent months, companies from mortgage lenders, hedge funds and firms investing in structured products - such as asset-backed bonds - have been racing to dump mortgage assets to repay creditors, as the fallout from the credit squeeze continues to reverberate. The upshot: Businesses are earning even less from selling loans, more lenders are failing, and investors - except for those savvy specialists in distressed investing - are reluctant to dip their toes back.
In a report titled "De-Leveraging Destroying Value - New Capital Needed," analyst Paul Miller Jr. at Friedman Billings Ramsey estimated that it takes roughly $150 billion to $250 billion of new capital to "normalize pricing" in the mortgage market. But it's also a kind of Catch-22 situation: Without new capital, it could be difficult for asset prices to come back up; without pricing adjustment and better returns, new capital may be hard to come by.
Miller projected that it will take six to 12 months for the prices of mortgage assets to normalize and for capital to flow back into the space. "There is no quick fix here," he noted. And until then, lenders will continue to come under pressure with respect to earnings and book values.
By Lingling Wei and Kevin Kingsbury
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--It may take a long time for investors to start bidding for mortgages again.
In recent months, companies from mortgage lenders, hedge funds and firms investing in structured products - such as asset-backed bonds - have been racing to dump mortgage assets to repay creditors, as the fallout from the credit squeeze continues to reverberate. The upshot: Businesses are earning even less from selling loans, more lenders are failing, and investors - except for those savvy specialists in distressed investing - are reluctant to dip their toes back.
In a report titled "De-Leveraging Destroying Value - New Capital Needed," analyst Paul Miller Jr. at Friedman Billings Ramsey estimated that it takes roughly $150 billion to $250 billion of new capital to "normalize pricing" in the mortgage market. But it's also a kind of Catch-22 situation: Without new capital, it could be difficult for asset prices to come back up; without pricing adjustment and better returns, new capital may be hard to come by.
Miller projected that it will take six to 12 months for the prices of mortgage assets to normalize and for capital to flow back into the space. "There is no quick fix here," he noted. And until then, lenders will continue to come under pressure with respect to earnings and book values.
Friday, August 17, 2007
Now Countrywide Bank Responds..
Interesting, as I was reading the nice posting from Dow Jones on Barney Frank's comments another interesting note popped up related to my letter to my beloved Senator Mikulski. Again from Dow Jones Newswires:
DOW JONES NEWSWIRES
Countrywide Financial Corp.'s (CFC) Countrywide Bank unit said current issues in the mortgage market do not affect the security of FDIC-insured deposits at Countrywide Bank FSB.
The bank has more than $107 billion in assets.
Countrywide Financial's shares were up 2.25, or 12%, at $21.20 in recent trading. [end]
Interesting eh?
What is little know or understood by many has to do with one major legacy of the ex-Fed. Chairman Greenspan; he tacitly destroyed many of the laws passed by our Congress after the abuses in the 1920's and subsequent depression in the 1930's to protect investors. He did this with a "wink and nod" to deals and structures throughout his tenure and never sought nor received approval for his actions. It will only take one major failure luring in the FDIC to wake our sleepy ignorant government up.
DOW JONES NEWSWIRES
Countrywide Financial Corp.'s (CFC) Countrywide Bank unit said current issues in the mortgage market do not affect the security of FDIC-insured deposits at Countrywide Bank FSB.
The bank has more than $107 billion in assets.
Countrywide Financial's shares were up 2.25, or 12%, at $21.20 in recent trading. [end]
Interesting eh?
What is little know or understood by many has to do with one major legacy of the ex-Fed. Chairman Greenspan; he tacitly destroyed many of the laws passed by our Congress after the abuses in the 1920's and subsequent depression in the 1930's to protect investors. He did this with a "wink and nod" to deals and structures throughout his tenure and never sought nor received approval for his actions. It will only take one major failure luring in the FDIC to wake our sleepy ignorant government up.
The Credit Fallout Continues...Letter to Senator
Below is another letter I have written to my beloved Senator from Maryland. I think the nice lady actually listens because as before, the day following my letter Dow Jones Newswire posted a note related to the subject:
By Damian Paletta Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--House Financial Services Committee Chairman Barney Frank, D-Mass., urged the Senate on Friday to pass legislation that would allow Fannie Mae (FNM) and Freddie Mac (FRE) to purchase even more expensive mortgages than a bill Frank steered through the House earlier this year permitted.
"It now is clear we underestimated in the House bill how far we should raise the conforming loan limit, and the current crises in the mortgage market demonstrate we should raise it to a higher level." Frank said in a press statement. "I urge the Senate to make this a priority as part of GSE reform, because we now have the opportunity to help homeowners get access to needed credit by allowing Fannie Mae and Freddie Mac to play a larger role."
Fannie Mae and Freddie Mac are only allowed to purchase mortgages on the secondary market known as "conforming loans," and these loans cannot be higher than the conforming loan limit, which is presently at $417,000. The House-passed bill would allow government-sponsored enterprises to purchase more expensive mortgages in states where the cost of housing is higher, but Frank and Rep. Gary Miller, R-Calif., said Friday that the companies should be able to buy even more expensive loans.
Many of the current problems in the housing and credit markets are with subprime mortgages and "jumbo" loans that the GSEs aren't permitted to buy.
If the Senate passed a bill raising the conforming loan limit, House and Senate negotiators could agree on compromise language before the bill is sent to the White House. [end]
Seems someone may be listening:-) Now to my letter...
Dear Senator Mikulski, 15 August 2007
I am writing to follow up on my urgent request that you engage the Fed and Treasury in sorting out a solution for the secondary mortgage market crises that is upon us.
I was pleased to see some recognition of the problem by Mr. Bernanke and Mr. Paulson however no action has been taken other than to calm bank interchange rates with short term cash infusions of various sorts.
This letter is to offer specific actions that need to be taken immediately.
1) Increase the cap on Fannie Mae conforming loans by no less than 50%.
There has been talk of raising their overall portfolio limit. This is not necessary. It is absolutely crucial that the cap be lifted dramatically. As you know there are states like Maryland, New York and California where average home prices exceed $417,000 (the current cap) by a large margin.
Fannie & Freddie will NOT buy any junk off the market or be given the authority to invest in any sub prime loans existing on the market.
2) Force the major Wall Street banks (i.e.; JP Morgan, Goldman, Bear Sterns etc.) to pony up enough cash to create a “Fund” that will have the purpose of providing liquidity to the secondary market for loans. This “Fund” will likely need $250 billion in hard cash to function.
Note: This fund is NOT to “rescue” the garbage loans Wall Street packaged and sold to “investors” over the past few years. These loans were garbage, the credit standards ignored and “investors” should loose, period. There should be no purchases of these loans by this fund.
However, this fund is to provide whatever liquidity is necessary for sound lenders currently operating in the market to continue making qualifying home loans. This means purchasing their loans to be securitized and sold when market conditions improve.
In addition, this fund should provide the liquidity lenders need to refinance the garbage loans made by mortgage brokers with Wall Street’s blessing ONLY where the borrower (i.e.; citizen homeowner) has QUALIFING INCOME & CREDIT for a new loan. These refinances should be done where the borrower’s total out of pocket refinance costs are capped at 1% of the new loan amount (including transfers, taxes etc.)
This fund will NOT act as a “bail out” for any individual lender.
3) The government should seriously consider using Social Security receipts to purchase high quality AAA rated home loans form the market immediately.
Thank you for considering my options. Action needs to be taken now.
As you know the latest potential victim is the largest home lender in the country, Countrywide Finance. This company also functions as a bank taking deposits from citizens. The failure of institutions that are also retail banks will be of grave consequence to the American Economy!
Sincerely,
By Damian Paletta Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--House Financial Services Committee Chairman Barney Frank, D-Mass., urged the Senate on Friday to pass legislation that would allow Fannie Mae (FNM) and Freddie Mac (FRE) to purchase even more expensive mortgages than a bill Frank steered through the House earlier this year permitted.
"It now is clear we underestimated in the House bill how far we should raise the conforming loan limit, and the current crises in the mortgage market demonstrate we should raise it to a higher level." Frank said in a press statement. "I urge the Senate to make this a priority as part of GSE reform, because we now have the opportunity to help homeowners get access to needed credit by allowing Fannie Mae and Freddie Mac to play a larger role."
Fannie Mae and Freddie Mac are only allowed to purchase mortgages on the secondary market known as "conforming loans," and these loans cannot be higher than the conforming loan limit, which is presently at $417,000. The House-passed bill would allow government-sponsored enterprises to purchase more expensive mortgages in states where the cost of housing is higher, but Frank and Rep. Gary Miller, R-Calif., said Friday that the companies should be able to buy even more expensive loans.
Many of the current problems in the housing and credit markets are with subprime mortgages and "jumbo" loans that the GSEs aren't permitted to buy.
If the Senate passed a bill raising the conforming loan limit, House and Senate negotiators could agree on compromise language before the bill is sent to the White House. [end]
Seems someone may be listening:-) Now to my letter...
Dear Senator Mikulski, 15 August 2007
I am writing to follow up on my urgent request that you engage the Fed and Treasury in sorting out a solution for the secondary mortgage market crises that is upon us.
I was pleased to see some recognition of the problem by Mr. Bernanke and Mr. Paulson however no action has been taken other than to calm bank interchange rates with short term cash infusions of various sorts.
This letter is to offer specific actions that need to be taken immediately.
1) Increase the cap on Fannie Mae conforming loans by no less than 50%.
There has been talk of raising their overall portfolio limit. This is not necessary. It is absolutely crucial that the cap be lifted dramatically. As you know there are states like Maryland, New York and California where average home prices exceed $417,000 (the current cap) by a large margin.
Fannie & Freddie will NOT buy any junk off the market or be given the authority to invest in any sub prime loans existing on the market.
2) Force the major Wall Street banks (i.e.; JP Morgan, Goldman, Bear Sterns etc.) to pony up enough cash to create a “Fund” that will have the purpose of providing liquidity to the secondary market for loans. This “Fund” will likely need $250 billion in hard cash to function.
Note: This fund is NOT to “rescue” the garbage loans Wall Street packaged and sold to “investors” over the past few years. These loans were garbage, the credit standards ignored and “investors” should loose, period. There should be no purchases of these loans by this fund.
However, this fund is to provide whatever liquidity is necessary for sound lenders currently operating in the market to continue making qualifying home loans. This means purchasing their loans to be securitized and sold when market conditions improve.
In addition, this fund should provide the liquidity lenders need to refinance the garbage loans made by mortgage brokers with Wall Street’s blessing ONLY where the borrower (i.e.; citizen homeowner) has QUALIFING INCOME & CREDIT for a new loan. These refinances should be done where the borrower’s total out of pocket refinance costs are capped at 1% of the new loan amount (including transfers, taxes etc.)
This fund will NOT act as a “bail out” for any individual lender.
3) The government should seriously consider using Social Security receipts to purchase high quality AAA rated home loans form the market immediately.
Thank you for considering my options. Action needs to be taken now.
As you know the latest potential victim is the largest home lender in the country, Countrywide Finance. This company also functions as a bank taking deposits from citizens. The failure of institutions that are also retail banks will be of grave consequence to the American Economy!
Sincerely,
Thursday, August 02, 2007
Subprime Primetime
Copy of letter to Senator Mikulski on Subprime meltdown and one rescue by German Government, yes RESCUE!
Hello Senator Mikulski,
I called your office yesterday to alert you to the ongoing problems with the mortgage industry in the US. I urge you to call the Treasury and Fed and request they take action to halt the meltdown of the mortgage industry.
The problems at hand are not unlike the meltdown in 1998 of Long Term Capital. Tuesday American Home Mortgage reported they failed to fund $650 million in promised mortgages to Americans on Monday & Tuesday. This is likely to have continued with millions of promised mortgages not going to closing because of Wall Street’s refusal to further fund mortgage companies.
Basically, Wall Street firms, in their infamous greed, managed to shift 40% of the home mortgage business to themselves over the past 5 years. Unfortunately, these firms are not banks so they depend on investors to provide the capital to fund mortgages. In addition, mortgage companies were financially incentivised to put higher and higher interest loans up for sale to beef up the fees and interest rates on the products Wall Street then sold.
The entire cycle will be looked on in the future as a great travesty on the American public with fraud and greed of Wall Street preying on potential homeowners as a way for them to cash in on rising property values around the country. Wherever there is money being made in this country, Wall Street will find a way to securitize it and make money off of it. This is what free market capitalism is about, OK, but when unregulated investment pools creep into the regulated economy of the American homeowner with Wall Street firms acting as the middleman you get a foul stew to say the least.
To have several of the top 10 mortgage companies in the US facing bankruptcy because the firms that funded them until now have forced massive write downs on their mortgage portfolios held as collateral causing them to have to put up more cash then they have on their books is wrong and poses grave risk to the entire debt markets.
Our nation unfortunately is founded on debt, period. To have the debt markets collapse in any category is dangerous and requires immediate attention by those at the highest offices in the US.
You may recall the letter I sent to you echoing my concerns to Mr. Paulson to pay attention to the debt markets and not to pay attention to Sarbanes-Oxley. Now my words ring true and I urge you to force action on Wall Street to fund these companies and stop the dominoes from falling.
Sincerely,
Patrick Henry
Ps: Please find this piece from the FT today where the German Government has intervened to stop an investment firm from collapse in that country.
Germany rescues subprime lender
By Our International Staff
Published: August 1 2007 21:49 Last updated: August 2 2007 00:40
US mortgage turmoil hit investor confidence on the other side of the Atlantic on Wednesday as details emerged of a German government rescue of a domestic lender that suffered heavy losses on subprime investments.
The rescue of IKB, a specialist lender based in Düsseldorf, began on Sunday when Peer Steinbrück, German finance minister, called top banking executives to discuss a bail-out. According to people who took part in the conference call, Jochen Sanio, head of Germany’s financial regulator, is said to have warned of the worst banking crisis since 1931.
IKB surprised investors this week with a profits warning after a multi-billion euro fund it managed was hit by problems stemming from its US subprime exposure. The news sent its shares plunging and prompted KfW, the state-owned development bank, to step in with a pledge to guarantee obligations of more than €8bn ($10.9bn) – more than five times IKB’s stock-market value.
The further government intervention suggested that the problems at IKB were much worse than thought. Mr Steinbrück phoned several banking executives – including Josef Ackermann, chief executive of Deutsche Bank – on Sunday to bring them on board.
Deutsche Bank, Commerzbank and other German lenders are taking a 30 per cent stake in a rescue fund worth €3.5bn, FT Deutschland, the Financial Times’s sister paper has learnt, with the rest shouldered by KfW.
The report on the German intervention came as more bad news from hedge funds and the housing sector roiled markets.
[Article cut here]
Hello Senator Mikulski,
I called your office yesterday to alert you to the ongoing problems with the mortgage industry in the US. I urge you to call the Treasury and Fed and request they take action to halt the meltdown of the mortgage industry.
The problems at hand are not unlike the meltdown in 1998 of Long Term Capital. Tuesday American Home Mortgage reported they failed to fund $650 million in promised mortgages to Americans on Monday & Tuesday. This is likely to have continued with millions of promised mortgages not going to closing because of Wall Street’s refusal to further fund mortgage companies.
Basically, Wall Street firms, in their infamous greed, managed to shift 40% of the home mortgage business to themselves over the past 5 years. Unfortunately, these firms are not banks so they depend on investors to provide the capital to fund mortgages. In addition, mortgage companies were financially incentivised to put higher and higher interest loans up for sale to beef up the fees and interest rates on the products Wall Street then sold.
The entire cycle will be looked on in the future as a great travesty on the American public with fraud and greed of Wall Street preying on potential homeowners as a way for them to cash in on rising property values around the country. Wherever there is money being made in this country, Wall Street will find a way to securitize it and make money off of it. This is what free market capitalism is about, OK, but when unregulated investment pools creep into the regulated economy of the American homeowner with Wall Street firms acting as the middleman you get a foul stew to say the least.
To have several of the top 10 mortgage companies in the US facing bankruptcy because the firms that funded them until now have forced massive write downs on their mortgage portfolios held as collateral causing them to have to put up more cash then they have on their books is wrong and poses grave risk to the entire debt markets.
Our nation unfortunately is founded on debt, period. To have the debt markets collapse in any category is dangerous and requires immediate attention by those at the highest offices in the US.
You may recall the letter I sent to you echoing my concerns to Mr. Paulson to pay attention to the debt markets and not to pay attention to Sarbanes-Oxley. Now my words ring true and I urge you to force action on Wall Street to fund these companies and stop the dominoes from falling.
Sincerely,
Patrick Henry
Ps: Please find this piece from the FT today where the German Government has intervened to stop an investment firm from collapse in that country.
Germany rescues subprime lender
By Our International Staff
Published: August 1 2007 21:49 Last updated: August 2 2007 00:40
US mortgage turmoil hit investor confidence on the other side of the Atlantic on Wednesday as details emerged of a German government rescue of a domestic lender that suffered heavy losses on subprime investments.
The rescue of IKB, a specialist lender based in Düsseldorf, began on Sunday when Peer Steinbrück, German finance minister, called top banking executives to discuss a bail-out. According to people who took part in the conference call, Jochen Sanio, head of Germany’s financial regulator, is said to have warned of the worst banking crisis since 1931.
IKB surprised investors this week with a profits warning after a multi-billion euro fund it managed was hit by problems stemming from its US subprime exposure. The news sent its shares plunging and prompted KfW, the state-owned development bank, to step in with a pledge to guarantee obligations of more than €8bn ($10.9bn) – more than five times IKB’s stock-market value.
The further government intervention suggested that the problems at IKB were much worse than thought. Mr Steinbrück phoned several banking executives – including Josef Ackermann, chief executive of Deutsche Bank – on Sunday to bring them on board.
Deutsche Bank, Commerzbank and other German lenders are taking a 30 per cent stake in a rescue fund worth €3.5bn, FT Deutschland, the Financial Times’s sister paper has learnt, with the rest shouldered by KfW.
The report on the German intervention came as more bad news from hedge funds and the housing sector roiled markets.
[Article cut here]
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