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Government will back Fannie & Freddie
The logos for Freddie Mac and Fannie Mae
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TEXT OF INTERVIEW
Bob Moon: Why is the government rushing to the rescue of Fannie Mae and Freddie Mac? Consider that those two firms have accounted for almost 70 percent of all new mortgages this year. Without them, the housing market would all but seize up, so the government is seizing the moment.
Our New York Bureau Chief Amy Scott is with us. Amy, what exactly is the government's plan?
Scott: Well, the Treasury Department is asking Congress to temporarily increase a line of credit that each of these two companies has. The Treasury's also looking for the temporary authority to buy equity in either company if needed. Secretary Paulson says the idea is to make sure that they have sufficient capital to continue to serve their mission.
Moon: And what exactly are they hoping to accomplish here?
Scott: These companies either own or finance nearly half of all mortgages in this country -- more than $5 trillion worth -- so they're hugely important to the housing market and investors have been questioning whether they have enough capital to cover losses from mortgage defaults.
Allan Mendelowitz is a member of the board of directors at the Federal Housing Finance Board, which regulates the Federal Home Loan Bank System, and he says the move sends a message to the markets.
Allan Mendelowitz: What the government is basically saying is that we're going to do everything necessary to ensure that these businesses continue to function well in the marketplace and we're going to everything necessary to restore the markets confidence in these organizations.
Scott: So we'll be watching today to see how U.S. investors respond. Freddie Mac is scheduled to auction off $3 billion in debt today and analysts will be watching the auction as a sort of gauge of investor confidence.
Moon: OK, here's the big money question, though: What is this going to mean for taxpayers?
Scott: Well, you know, New York Senator Charles Schumer praised the plan, saying it would minimize the cost to taxpayers. It appears to be designed to boost investor confidence without actually injecting any cash yet, but if the government does end up stepping in and either loaning money to Fannie and Freddie or investing in them, that could certainly leave taxpayers could be on the hook.
Moon: Our New York Bureau Chief Amy Scott. Thank you.
Scott: Thanks Bob.
Freddie Mac Please do not place the property at
47 S. Raleigh st
Denver CO 80219 among your homes for sale rosters. To do so would be a
terrible miscarriage of commerce and American resolve. If you, the reader
find this communication to be beyond the scope of your resolve, it is your
civic duty to see that this is seen by someone who can see that this matter is resolved with due diligence. DO THE RIGHT THING
Please find that I am not the borrower on the defaulted loan against the subject property. I am the principal resident of the subject property. I purchased the subject property(SP) as uninhabitable vacant land in 1989
and built the house on the land by myself. My wife and I are raising four children on the SP. In 2005 I suffered a job loss due to down sizing and
began to fall behind on my Ameriquest mortgage against the SP. The SP
was consequently slated for public sale on 9/25/2006. A few days before the sale, here comes a Colorado Home Savers agent telling my wife and I
how he could save our home. We were told that the details would have to
be worked out later, since the sale was eminent. On the morning of the day our home was to be sold in foreclosure, my wife and I had arranged to
meet with the agent at a title company in an adjacent county. My wife and I understood that we were going to sell our home and enter into a lease buy
back agreement. My wife and I were hushed by the agent when we started to inquire about the lease/buy back part of this major transaction that was about to occur, we were told not to "blow" the deal. Moments after the closing officer told us that the signing was complete, monies were
wired to the trustee back in Denver county. I'll never forget the smirkish
smile on the agents face when he continued our duress by instructing my wife and I to return to our home to sign the lease/buy back agreement.
The agent, my wife and I sat at the kitchen table of the house I built.
The agent places his lease/buy back before us and we glower in protest
of the of the huge monthly payment, a 72% increase over the $700/month
Ameriquest payment that resulted in foreclosure in the first place. I asked
the agent how he expected us to pay $1200/month, when we had been struggling to pay $700/month. The agents smirk intensified as he stood up and told us to either sign the lease or move out. Duress,duress,duress we
signed the lease. Low and behold, we paid the $1200 a month and in the process destroyed our credit and diminished our quality of life.
After three years of performing this unconscionable contract we realize that we would never be able to repurchase our home under these circumstances. When we learned that the agent had stopped paying on
the loan that has now come to you at Freddie Mac, we went to the county
clerk office and discovered that the agent had quit claimed the subject property to a family trust for $10(ten dollars), order to keep foreclosure off
his credit. The agent made no effort to file an intent cure or modify the loan. WE SHOULD NOT LOSE OUR HOME IN THIS CIRCUMSTANCE.
PLEASE TAKE THIS TO THE ENTITIES WITHIN FHA OR HUD OR FREDDIE WHO WILL
DO THE RIGHT THING.
Please let me know how I can be of assistance. I have been asked to share the above with a national media entity on Wednesday. I have been advised to send this to a various government and private
agencies. Can Freddie Mac resolve this or not.
Sincerely, Grover Williams 720-422-5921
Cc. FHA, HUD, ICP,ECT,USAG
There has been too much panic in the media about Freddie and Fannie's losses.
These companies were created by the federal government to be the fuel line and the shock absorbers of the mortgage industry.
For decades they performed their fuel line duty and lowered our mortgages by about 1%. Now, by absorbing losses they are protecting the conventional mortgage market from collapse.
Even a bailout would be far cheaper to the taxpayer than what would have happened if all mortgages operated the way sub-prime and jumbo loans do.
Instead, for once, our government is planning to do something brilliant. By extending the credit limit and buying their stock, they are ensuring that those companies will remain solid and recover from the losses... while at the same time buying stock while it is at bottom price. By the time all is said and done, taxpayers may even make a profit on the investment!
So... let's keep a bit of perspective here. Freddie and Fannie investors may be loosing their shirts. Investors in mortgage backed securities aren't loosing their principal... only expected interest gains. And the rest of us, we are probably benefiting by the fact that these companies are there to absorb the impact.
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In case it is relevant, I worked for Freddie Mac for about 10 years ending around 1997. During those years they used to make a big deal that they were setup in such a way that they could survive 10 years of 1920's style recession (**survive**, not come out unscathed).
