The 3 F's - Fannie Mae, Freddie Mac and the FHA

There has been a series of Congressional hearings and there are two which point to some serious trouble at our never ending financial black holes, Freddie Mac, Fannie Mae and the FHA.

Firstly, Fannie & Freddie might require even more money, even though they have received $96 Billion in bail out cash. Total losses to date from these two is $196 billion.

Their books are still bleeding red as foreclosures rise and homeowners — even the highest-quality borrowers — fall behind on their mortgage payments. Several crucial positions remain vacant, and Mr. DeMarco said the agencies are worried about losing workers because of the uncertainties surrounding their fate.

Right now, 3.1 percent of Freddie Mac loans are seriously delinquent, and Fannie’s seriously delinquency rates is an even higher 4.2 percent, Mr. DeMarco testified. And as unemployment nears 10 percent and homeowners struggle to persuade lenders to refinance their mortgages, delinquency rates are rising.

Fannie and Freddie now manage a stable of nearly 100,000 foreclosed properties, whose numbers are almost certain to grow.

Onto the FHA. Guess what, the FHA may need a bail out. They already have $54 billion in losses they cannot absorb. Gets Better. Ed Pinto testified (large pdf), that the FHA has a long history of fraud and has added thousands of new lenders in the last two years, which are basically not vetted.

I suggest reading the entire testimony, it's loaded with figures, charts on the FHA justifying these dire warnings.

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It kind of makes you wonder if asset price bubbles was

the intentional and explicit economic policy of the previous administration after most of the testimony particularly about the part of adding all of those lenders.

It is a shame though that they have severely damaged a good program - FHA.

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just in general

It just seems that doing things which make sound financial sense, just generally, has been flow out the government window for at least 15 years.

When I read this, I was horrified.

Note, one of his recommendations to fix the FHA is to require a 10% down payment on a home.

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When my family purchased our first home many years ago

we put 5% down and probably a more grueling underwriting process.

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Asset Bubble

Our own experience shapes our perceptions and how we interpret things. Home ownership was considered "A good thing," almost an entitlement -- for a long time, mortgage payments and rents were pretty much equal, and after 30 years you owned it. And inflation sped up the rate at which you built equity -- so after, say 7 years, you were ready to trade up. I believe we came to regard inflation as an entitlement as well -- cost-of-living raises kept the pain down. We felt bad for those living on "fixed incomes." Greenspan had a few years of low inflation and always had an invitation to the White House. How could you argue with success that seemed to confirm his key theories? And tax cuts -- Dick Cheney said, "It's our due." Experience confirms our wishful theories. But this time, it is different. Things got way out of control and inflation isn't bailing us out. Let's hope Ben brought some magic to the party. I want to believe!
Frank T.

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Frank T.

FHA will need a $54 Billion taxpayer bailout

The bill for the government's attempt at propping up the housing market is about to come due.

(Bloomberg) -- The Federal Housing Administration, which insures mortgages with low down payments, may require a U.S. bailout because of $54 billion more in losses than it can withstand, a former Fannie Mae executive said.
“It appears destined for a taxpayer bailout in the next 24 to 36 months,” consultant Edward Pinto said in testimony prepared for a House committee hearing in Washington today. Pinto was the chief credit officer from 1987 to 1989 for Fannie Mae, the mortgage-finance company that is now government-run.
The FHA program’s volumes have quadrupled since 2006 as private lenders and insurers pulled back amid the U.S. housing slump, Pinto said. The jump has left the agency backing risky loans and exposed to fraud in a “market where prices have yet to stabilize,” he said.
Representative Scott Garrett, a New Jersey Republican, introduced legislation this month to boost the FHA’s minimum down payment to 5 percent from 3.5 percent to help shore up the agency’s insurance fund, a move that could add to the housing market’s burdens as it struggles to recover.

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why the title the "3F's"

as in "F" grade. I'm sorry but it's like they aren't fixing a damn thing here.

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There is another gov't entity out there that get little

attention - Ginnie Mae - Government National Mortgage Association. Ginnie Mae, unlike Fannie and Freddie, is entirely operated by the government.

I would be curious (research project) to see how its doing compared to Fannie/Freddie.

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