Last week Freddie Mac requested $10.6 billion in government assistance following an $8 billion loss in the first quarter of 2010, today Fannie Mae requested $8.4 billion having lost $11.5 billion in the first quarter driven by “continuing weakness in the housing market” and warning of “significant uncertainty” as to the entities long-term financial sustainability.
That being said, “Fannie said that 5.47% of its loans were 90 days or more past due at the end of March, down from 5.59% in February and the first monthly decline in nearly three years.”
Fannie, Freddie and the Federal Housing Administration backed 96.5% of home mortgages originated in the first quarter of 2010.
∙ Fannie Mae Needs $8.4 Billion More in Aid after First-Quarter Loss [WSJ]
∙ Fannie Mae As The Largest Lender Landlord In All The Land? [SocketSite]
“Fannie sees no profits for the “indefinite future” … financial sustainability uncertain.”
http://www.marketwatch.com/investing/stock/fnm
You can see the scale of Fannie’s deliquency rates here
http://www.calculatedriskblog.com/2010/05/fannie-mae-115-billion-loss-sees-no.html
and keep in mind “Home Values Continue To Fall, More Owners ‘Underwater'”
http://www.cnbc.com/id/37020439
“Dear Mom: Camp is fun. Having a great time. Send money.
Love, Fannie and Freddie”
That chart on Calculated Risk that badlydrawnbear linked is quite shocking. FNMA default rate is now 10x the historical norm and this happened all of a sudden in 2008. http://calculatedriskimages.blogspot.com/2010/05/fannie-mae-serious-delinquency-rate-feb.html
It really puts into perspective the quasi good news of the rate declining from 5.59% to 5.47%. Yes, a decline is good, but 5.47% is still enormously out of line with historical norms.
Don’t overlook this gem:
“Government institutions – mainly Fannie Mae, Freddie Mac, the Federal Housing Administration and the Veterans Administration – backed nearly 97 percent of home loans in the first quarter of 2010, according to trade publication Inside Mortgage Finance.”
Somebody tell me again about how “resilient” the market is? So much for all the “dynamic non-linear market” nonsense; there’s no real market to speak of. Take away this massive subsidy and we’re at 8% mortgages requiring 20% down or more. So long fake recovery.
Thank you, bdb, for reminding me that I should continue to sit out the housing market for a while longer. But damn, that graphic is scary and depressing.
On a related note..I went househunting recreationally for the first time in a long time this past weekend. There were hordes of people looking at meh 700-something condos in the Castro. There was one first open on Hartford Street where the agent was announcing that they will be inspecting offers this week. Ugh, felt like the bad old days. And inspires cognitive dissonance when you look at these national stats.
I’m happy renting for a while, I think.
^^^ Re: “I went househunting recreationally for the first time in a long time this past weekend. There were hordes of people looking at meh 700-something condos in the Castro. There was one first open on Hartford Street where the agent was announcing that they will be inspecting offers this week. Ugh, felt like the bad old days….I’m happy renting for a while, I think.”
Ditto here. I checked the MLS and the asking price of 234 Hartford is north of $700/square foot, and the seller’s agent is trying to ignite a 2007-style bidding war? The only rational response as a potential buyer is to continue to stay on the sidelines and let some other lemming jump off the cliff.
When the gov’t is trying to “stimulate” you into making a purchase (of any asset), is it really in your best interest to do so? Find another asset class that isn’t receiving such a favorable tailwind and park your money there.
What the 97% figure means:
Almost no private entity is willing to fund mortgages. Only the Govt will. This means anyone playing with his own money believes the RE correction is not done yet.
Who do you believe? Irresponsible bureaucrats with endless taxpayer credit or the people with a real insight on the market?
I’ve said for some time that the mortgage market is nationalized.
I’ve also said for some time that fannie and freddie will be/are being used as a backhanded way to bail out the zombie banks.
why do you think they raised the Fannie/Freddie loss support to “unlimited” from $400 Billion? clearly, it’s because Fannie/Freddie are TARP II.
the political winds are still pro-housing, so housing will likely continue it’s leveling off… at least until the political winds change.
Unfortunately, there still is no “exit strategy”. so we will blow all our money keeping over-valued assets overvalued. And also in transferring taxpayer money to banker bonuses. And eventually people will start to question our sovereign debt, just like they are doing with the PIIGS countries and UK and Japan. but we’ll have blown our wad by then.
pity really.
The only exit strategy is inflating our way out of this. The problem with inflation is that we all know how to start it, but few know how to stop it before it does too much damage.
Say you run a 10%/GPD deficit on a 100%/GDP debt.
1% inflation, interests at 2%, debt interest is only 20% of your deficit. Groovy.
Run a 10% inflation. No-one wants to lend you at 2% anymore. The rate is 12% says the lender. Your deficit grows to 20% of last year’s GDP but inflation brought your GDP up. If you has no growth, you’re back to 10% deficits! This inflation money will not have created any new jobs, and your total debt will have not gone down.
The best solution is deficit reduction and growth. Ask Greece how they’re planning to reconcile the 2!
For the chart lovers in the crowd I give you …
Fannie Freddie FHA REO Inventory Q1 2010
http://calculatedriskimages.blogspot.com/2010/05/fannie-freddie-fha-reo-inventory-q1.html