Wednesday, January 6, 2010

Does the Fed Want to Crash the Housing Market a Second Time?

There is a curious rule change that was made at government controlled Fannie Mae. And it was announced on one of the top news dump days of the year, December 24, Christmas eve, when you were away visiting relatives.

If you have to relase news and you don't want anyone to see it, December 24 is one of the days you dump news. That alone should cause you to look twice at the news. And in this case, you should look real close. I think it signals that the government may be preparing to take the housing market down one more time.

Specifically, here is what happened when Santa Claus was already in his sleigh, trying to bring good cheer. Fannie Mae changed one of its policies for disposing of foreclosed homes.

Typically when a home is repossessed, the government-sponsored enterprise will put the property on the market and around the same time ask the servicer for the loan files for Fannie to review. If the review finds the mortgage was not underwritten to the GSE's requirements, Fannie can make the lender reimburse it for any losses on the sale of the home.

In a Decmber 24 notice to servicers, Fannie said that from now on it reserves the right to accept offers for repossessed homes without notifying the servicer and regardless of whether the loan review has been completed, American Banker reports.

Previously, if the servicer provided the files within 15 days of Fannie's request, the GSE would hold off on accepting offers for a house. In such cases, if the servicer thought it could get a better price for the house, it had the option of buying the home from Fannie rather than indemnifying the GSE for any losses.

Got that? Fannie can now just dump a house without getting back to the servicer to see if the servicer would be willing to pay more for the house.

This is a license for Fannie to unload its inventory at fire sale prices without the servicer being able to step in and say "Hey, I'll buy back the house if you are going to try and sell it that cheaply."

Is a fire sale coming? Sounds like it to me.

The GSE has estimated that 14% of the Fannie Mae guaranteed mortgages now have mortgages that are bigger than the homes are worth.

Happy New Year.

(htMikeDunton)

7 comments:

  1. I find it more likely that they will dump the houses into some form of government "trust" rather than the open market. I'm sure word has come down from on high, "what ever you do, do not let the housing market slip." Keeping the housing market inflated is why they are continuing to make the same horrible loans that got us here.
    ......at least that's the way I see it.

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  2. I think the previous comment misses the mark.

    Municipalities, especially higher income municipalities that are more recently just beginning to experience empty building blight, -they're not going to tolerate what went on in the mostly black and poor-white, urban centers that were literally destroyed by foreclosures.

    Fannie Mae is getting righteous pressure that comes to it through Congress, is what I see.

    Upper scale communities will not sit around and wait for Fannie Mae to get its act together before addressing the issue of vacant housing in their midst.

    I have a vacant house next to me. It's been vacant now for three years. Two of those years it was being held onto by heirs after the occupant died. But the heirs gave up, and now Fannie Mae owns it.

    It's on the books for about six to seven times what it is worth in today's market.

    From my experience, and given these dynamics -it would be another three years before Fannie Mae would otherwise -finally put it on the market at a price it would sell for.

    I'm in northern Maine.

    Winterized or not, three years from now, this property will be worth less than half what it might be worth today, if Fannie Mae decides to sell it -today.

    This property also has a high property tax evaluation, making it an even less desirable piece of real estate.

    It's called being between a rock and a hard place.

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  3. heh ? Congressman Dennis Kucinich sent out a notice on the REAL problem...basically, freddie/fannie have "only" used 110 billion of the 400 billion credit they were given...and because it looks like they don't need it, the ceiling was raised to infinity ? looks like freddie/fannie are being primed to be a stealth tarp and pump a few more trillion to the bankers....THAT is the REAL problem....a few families owning the fed reserves of the world IS THE 1000 pound gorilla...that economists refuse to see cause that is their purpose...hide the gorilla

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  4. EVEN JR HIGH CHILDREN ALREADY KNOW THE UNITED SNAKES IS A FIRE SALE..5 CENTS TOO THE DOLLAR..OUR MONEY ISNT WORTH SHIT..OUR COUNTRY AINT WORTH SHIT..CAUSE MORONS RUN IT..CAUSE IM A HIGH PRICED PERSON IN A LOW BUDGET LAND..THANKS YOU RAY DAVIES..ONE OF THE SMARTER PEOPLE IN THIS WORLD OF STUPITY

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  5. And this sticks the family who had the original loan on the house with yet more to pay off as a result, doesn't it?

    Great posts --keep up the good work!

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  6. When will people acknowledge that
    SATAN - LUCIFER is ruling this world? Things could not be any worse, yet daily they are getting
    beyond survival. I suggest to use
    your pyschic imaginary powers and
    watch these powercrazy tools of satan to disintegrate with horrid
    pain, as they sit in their offices,
    talking shit on the phones or pcs.
    We got the power, the more the better. We can do this, get stated

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  7. sounds as if the dems need a rise in housing sales before election day, what better way to raise stastics on housing sales than to give them away all summer so the sheeple hear, housing is booming and we, the Dems have turned this thing around, isn't Obama and his staff great? Politics is a dirty game! Dems or repubs, they are all a bunch of crooks. wake up! They don't care about the working middle class.

    ReplyDelete