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What do I care! It's not my money.
Local GSEs, Fannie Mae in northwest Washington, D.C. and Freddie Mac in Tyson’s Corner, Virginia will have diminished roles in buying mortgages until they put their books in order. At least that is the word from the Federal Housing Finance Agency Acting Director on Tuesday.
In a speech before Congress, Mr. Demarco defended putting both agencies into receivership in 2008. Since then, losses have risen to $111 billion for FNMA and $63 billion for FHLMC. Despite their failures, lawmakers may have little choice but to order more ink and keep the presses spewing out dollars. One would think $1.25 trillion of our money would have more of an impact. Gone are the days of a clean bailout. Those receiving money often reveal their true losses after the fact. At least we can take heart in knowing bonuses are being paid to those who lost our money. A comforting thought to have when you rest your head on a pillow, providing you still have a bed and a home to put it.
Anyway, the week before they were taken over by our Federal Government, their stocks were trading around $21.00. Today both trade around $1.00 and often less. Unless another infusion is granted by Congress, it is likely their share prices will near zero. This poses a serious problem for the Obama Administration as it tries to steer the economy into the calmer waters of fiscal solvency. Without the two leviathans (FNMA and FHLMC) buying mortgages from banks originating loans, lending institutions will have to keep them on their books. A situation such as this bodes poorly for those with less than perfect credit hoping to get a loan that is not directly underwritten by the government, such as FHA loans. Mortgages insured by the Federal Housing Administration have borrower qualifications that are less dismissive than those levied by private banks.
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