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Exactly, FnF are getting ahead of the bill and the critics
Either way that this works out, will be a positive for FnF, good commentary also.
Please see an excerpt from another article below that the MBS buyers don't feel comfortable buying MBS's that dont have government backing.
http://dealbook.nytimes.com/2013/06/27/an-old-champion-returns-for-mortgage-based-bonds/?partner=yahoofinance&_r=0
But as the last-minute restructuring of Thursday’s deal showed, investors remain nervous about the types of investments Mr. Ranieri is pushing, which do not have government backing.
In addition, the Shellpoint deal had some features that raised eyebrows among prospective buyers. The security includes a number of loans to foreign nationals and real estate investors, in addition to a relatively high concentration of properties in California, according to a report by Fitch Ratings.
The media tide could be shifting, maybe?
This article states that FnF are are going to be subject to "qualified mortgages", if "they are ongoing", and that Watt is pro FNF. This to me sounds like the reform that will be in place and will keep FnF going. It also goes on to say that he is pro FnF.
There is going to be a compromise to appease some in DC that want to get rid of FnF and this could be groundwork for the beginning of it. Qualified mortgages basically tighten underwriting guidelines a little more than they are right now. please see article and link to article below.
Comings and Goings
FHFA Nominee Faces Senate Skepticism of Skills to Oversee GSEs
U.S. Representative Mel Watt faced lawmakers skeptical of his knowledge of housing-finance issues yesterday when he appeared at a Senate Banking Committee hearing on his nomination to oversee Fannie Mae and Freddie Mac. (FMCC)
Watt, 67, a North Carolina Democrat, offered a bipartisan plan to eliminate the two U.S.-owned companies and replace them with a government reinsurer.
The Federal Housing Finance Agency has explicit authority to help low-income buyers, he told the Senate Banking Committee panel. The agency shouldn’t make or guarantee loans that can’t be paid, he said.
He added that Fannie and Freddie should be subject to the qualified residential mortgage rule, if they are ongoing, and the two should only back loans meeting the qualified mortgage rule.
The Watt nomination is President Barack Obama’s second attempt to fill the FHFA post held since 2009 by Acting Director Edward J. DeMarco, who has been criticized by Democratic lawmakers and consumer-advocacy groups for doing too little to help homeowners struggling in the wake of the financial crisis. The president’s first choice, former North Carolina banking commissioner Joseph Smith, withdrew in 2011 amid Republican opposition.
Watt’s chances of gaining confirmation remain unclear. He would need support from at least five Republicans to gain the 60 votes needed for Senate confirmation if he’s backed by all 55 lawmakers who caucus with the Democrats in the 100-member body. Only one Republican, Senator Richard Burr from North Carolina, has endorsed him.
Senate Banking Committee’s top Republican, Mike Crapo of Idaho, said his concerns about Obama’s choice of Watt, to lead the FHFA reflect the “political nature” of the nomination.
His concern isn’t a reflection on Watt, who has had a “long and successful” career in Congress and is “well liked,” Crapo said in opening comments at the hearing. His concerns “reflect the unique position of the FHFA director,” who has almost “unchecked power” over mortgage market, Crapo said.
Watt, 67, backed a measure that would let bankruptcy judges force lenders to cut principal owed on mortgages -- a tactic that he called a legal “sledgehammer” against banks. Republicans say they will attack that position, his past support for Fannie Mae (FNMA) and Freddie Mac, and his qualifications for the job. Watt has served in Congress since 1992.
http://www.bloomberg.com/news/2013-06-28/corzine-sued-shifting-bank-losses-imaging3-compliance.html?cmpid=yhoo
59b repayment.....not 1 news feed?
They are probably trying to find a way to spin it negatively and haven't thought of one yet. My guess is that it will read "despite 59b repayment to tax payers presidential nominee watt supports winding down down fnf".... And then run the same story from yesterday again and again.....IMHO
100 percent agree
My opinion and 1 dollar can't buy you a cup of coffee (or even 1 share of FNMA, not even at this mornings opening price)....
Let's close green tomorrow!
I INVESTED in both FnF before the mania started (after their last earnings release and announcement of 59B payback which is happening tomorrow). I have yet to make a sell, only buys. Do I wish I sold at 5, of course, because I would have 5 times the position now with the original capital, but I am not a trader, nor do i claim to be. I sometimes wish I was, but have more of fear of missing the run up than i do losing, because that would hurt more. We could wake up any morning and be relisted because of sheer volume alone that otcbb has somehow been able to handle with these 2 horses.
There are 2 headlines that i can see now on the financial stations
"Fannie and Freddie millionaires" with a story of someone who invested 50k and walked with 1 million
And
"Fannie and Freddie bail out the US" (we kind of already saw that with the S&P upgrade of US a couple of weeks ago, but for some reason that wasn't the headline, only the news). That in and of itself should have taken this to $10 that day.
I will not sell until $20 minimum, but if it gets there, it is going to $60 because that means we have weeded through all of the trashing and been released from cship.
FnF - Emotional stocks - not data driven, yet!
When FNF are trading (and holding) at 20+ it will be very easy to ask "how could companies that have billions in profit and a virtual monopoly in the housing business ever been at less than $1 for such a long time, and why didnt i buy more"?
These companies are here to stay, in some shape or form forever. They are too big to wind down and could never be replaced.
My guess is that some in DC will have to be appeased, so they may merge them into 1 company, and make them take on less paper. The unintended consequence of that will be higher rates and not enough access to capital for the "tax payer". The tax payer is FnF's client. That is the joke of the whole thing. The tax payer will end up getting screwed with no FnF. Without FnF, the interest rates would be at 8% (double today) and underwriting guidelines would be much harder, not like they are easy now.
The funny thing about the subprime loans that almost ended the world a few years ago is that they were only 7% of the total mortgage market. The problem was that the banks had leverage on that 7% of 50 to 80-1 in some cases, and that over leverage is what almost did all of the banks in when the loans stopped performing. Now the new bill, which wants banks to lend wants them to have 10%. That is 10-1 leverage. So if they get rid of FnF, we can go bailout a bank or insurance company instead. We need FnF as the default regulator in the mortgage business, otherwise, banks would either not lend at all, which would kill housing, or make up their own guidelines to lend (I understand qualified mortgages, but they are not the solution either). FnF never did subprime loans, never. They were forced to take the garbage of those who did, which made them look bad on paper and have worked through that bad paper in the last 5 years and are incredibly run today and have a portfolio that performs great and virtually free of risk (there is always a the risk that comes with nature of course).
in a few years, if book value is what stocks trade based on, we will be between 70-100 share on FnF (conservatively). Google trades nearly 4 times book value, and apple trades nearly 2.5 times book value. Neither one of them makes as much money as FnF.
My thought is that we will at some point have the money that has already been paid as dividend be transferred to principal paydown, and then pay some interest on top of that, and then be regulated a little more (but there is really nothing to regulate because FnF have already self regulated, but I am sure that they can regulate the amount of loans made per month for example, which is the unintended consequence from above).
A good question to ask the authors of the bill is, which I am positive that they could not answer, would be, "what is wrong with FnF today"? I would love to hear the answer. If the answer has anything to do with the protection of the tax payer not footing the cost in a calamity, that would be a joke, because remember, the tax payer is FnF's customer, they are one in the same. That is the connection that needs to be made here, they are acting like FnF are lending to people on another planet, when they are indeed making loans to the tax payer that they are using as a prop to give the control back to the banks, it is so transparent.
I mentioned this before, but 90% of homeowners/tax payers (which have debt on their home) have a loan that is either an FnF security, or underwritten to FnF standards, this may even include the authors of the bill. That would be interesting to ask them who holds their loan, 50% chance they know the answer. If they took a poll of their constituents who had mortgages, it would be 90% plus with FnF financing.
Lets get some positive/make sense press in the next few weeks and open up strong tomorrow!
the media seems quiet....all things considered
maybe they are even tired of writing the same articles over and over again. I sure am sick of reading them......
Reuters ran the same article twice already with a different headline
They really need to find something to do other than bash a 1 dollar stock. It is so predictable at this point that it is laughable.
Market watch and bloomberg to follow.
That is the close that we needed!
If FnF were actually manipulated since 2:15 Tuesday, they did a great job, to a tee!
My thought from here is the multiple of $1. Now everyone who wanted it at 1, got it. The fact that we bought into close, and didnt sell, tells us something huge about this. The $1 mark is huge for the big guys, now when it goes to $5 again, they will have made a clean 5x their money.
Now, anyone who is in, may be in for the long haul. We are no where near out of the woods at all yet as we will see heavy bashing starting in about 15 minutes from the news outlets (with no mention of a green day).
If i am correct, we should see some good news stories come out next week and some panic buying for once like we had at the end of the day today.
Also, who in their right mind would short/bash a stock that is under 1.50? The upside (longs downside) is only $1 and some pennies, with the risk being upwards of the book value (at least, when releases from cship). If people want to bash this lowly (as they say) company, go bash/short companies that have market caps in the hundreds of millions and that trade in the $20-70 range. The only way that some of those companies who operate in the negative keep their doors open is because of loans and hopes (market belief) that they will some day become profitable. Go bash them and short them instead.
FnF are truly the backbone of the housing industry. I would imagine that the majority of those in DC have loans that were underwritten to FnF guidelines and are even secured by FnF. I mentioned this before, but go call your mortgage broker and ask them what FnF are on a daily basis in their office. Everything that they do is based on FnF guidelines and risk measures put into place in 2009 and modified every year since to mitigate risk (even portfolio lenders). If FnF were dissolved, the mortgage/real estate markets would literally come to a stand still and would become the wild west of lending again (at double todays rates which would destroy the housing industry). At the peak in 2007, the private industry accounted for 70% of originations and FnF and FHA 30%. It is now 90% FnF and FHA and 10% private (even that 10% follows FnF guidelines).
Like i said yesterday, this bill that the media loves so much (which they will change their toon on next week), is trying to fix a problem that fixed itself through capitalism and FnF internal reform. I hope someone can explain this clearly when debating the bill.
Let's have a good day tomorrow and the headlines may read in a few months "Fannie and Freddie bail out the US".......
Treasury payback tomorrow should really put things into perspective in DC
Hopefully the media mentions this tomorrow. If they don't then we all can figure out what is going on here.
If we can get released from chsip, we should see the price go to a normal level for firms (fnf) that make so much money.
We just need to have a strong close today and ride that into the morning. The problem is that some people are up 30% today from the bottom and will probably sell and take profit, which i cant blame them, but they then run the risk of missing the good news that will start coming out soon. As i said yesterday, when Watt starts to talk, we will rally, and we did, we just need to build momentum now into close and the weekend.
Why didnt they want to wind down AIG, GM, Chrysler, and the numerous other companies that took bail out funds. The reason that all of the money that FnF have sent to treasury is being perceived as dividends and not principal reduction is because they missed the first few quarterly dividend payments and the government had to ensure that they got paid back. We are 2/3 of the way there after tomorrows payment and that will also be talked about and should amend the dividend to repayment of principal from the current structure. Otherwise, it is literally unfair to treat FnF differently than the other companies mentioned above.
Lets rally into the close and see what happens tomorrow.
Once it is sold off, it is the property of the buyer. There is no implicit promise that it will perform and that is why it is auctioned off in a free market risk/reward system. FnF makes a premium at auction in relation to the rate that at which they are sold.
FnF basically, if they wanted, could keep them on their books (if they have the capacity) or sell them at auction for a premium, less than the 6% example that you used, as that reward goes to the buyer, but at a premium.
Once they are sold, they dont pay anything to the RMBS moving forward and that is what is worked into the calculation when they are bidding on the security on the buyers side.
The net assets are the trillions of mortgages that have not been sold at auction that are on the books of FNF. They trickle a few billion out every week or so as they couldnt sell them all at once, but could sell them over time. That is the value here.
FnF Business model
You will see that the debt/assets that FnF have are literally the same thing. The "debt" that people often refer too is/are also the assets (in the trillions). They hold the note/deed that is secured by the property that the note is against.
You will see that every week/month or so FnF have auctions selling those notes off to investors as RMBS's (residential mortgage backed securities).
I am sure if you look at the news feeds you will see that there is mention of auctions and/or sales of these, usually 2 or 3Billion at a time.
With home prices increasing you will see that the assets of FnF are safe as the equity that the homeowner has (because the homeowner will not walk away from that equity) protects the note that FnF could hold if the bank who lent the the money according to FnF guidelines wants to generate revenue and sell that paper to FnF.
If I were China/Russia or any other economically strong country, I would make the government an offer to buy FnF because then they would literally hold the rights/notes to 40% of the residential real estate in the US. Just imagine if that happened. Since the gov't has the rights to 79.999999 % at a cost basis of .000001 per share (if they exercise), at a sales price of $10/share we could pay a nice chunk (dont want to do the math now) of the national debt/deficit.
That is a question for the authors of this bill. just ask them, ok, instead of winding them down, let's sell them and get something out of them. The answer would probably be "no way", why would we sell them at such a discount. And that is the same answer that most of us that held on today had on why we didnt sell.
We will see tomorrow and in the coming months, but the liquidation value of of FnF is in the Trillions and that is in todays money, that is not taking into account what the 30 year mortgages that they have written will yield in the next 30 years in terms of payments, even more trillions.
What happened before in housing can't happen again
Someone took my earlier post and posted it on the freddie board
Then some kindly replied, that something needs to be done to make sure that tax payers (who are the same people FnF have refinanced or purchased a home with/for) would be protected in the future of another collapse. see my response below:
I actually wrote that post on Fannies board earlier today...
I appreciate it being borrowed for this board...
In terms of the risk, it is gone. If you can get the stats, find out what the percentage of defaults or even late payments is for all loans originated since 2009.
You will see the that reform that these folks are trying to put in place has already happened. What happened before can never happen again because of the stringent underwriting guidelines that are in place today and have been in place since 2009.
All loans require good credit history, assets, equity, and verified income. There are no more stated income or no/low documentation loans, they do not exist.
This bill is the equivalent of a how to on what to do if you are attacked by a dinosaur. Dinosaurs don't exist anymore, nor do risky loans.
I actually wrote that post on Fannies board earlier today...
I appreciate it being borrowed for this board...
In terms of the risk, it is gone. If you can get the stats, find out what the percentage of defaults or even late payments is for all loans originated since 2009.
You will see the that reform that these folks are trying to put in place has already happened. What happened before can never happen again because of the stringent underwriting guidelines that are in place today and have been in place since 2009.
All loans require good credit history, assets, equity, and verified income. There are no more stated income or no/low documentation loans, they do not exist.
This bill is the equivalent of a how to on what to do if you are attacked by a dinosaur. Dinosaurs don't exist anymore, nor do risky loans.
Tomorrow when Watt is asked about FnF...we will see a rally
Anyone who understands housing and finance, understands that:
1) There is no reason to get rid of FnF
2) There is nothing that can replace them
Todays action was rather disheartening, but there is a reason that the stock has never been completely de-listed from trading when the government took them into c-ship. We saw it when we ran to 5 + and we saw it today when we almost hit 1...that is 80% + down in 1 month roughly. makes zero sense other than fear selling to get to this level. FnF will be back in the saddle shortly. There is no way that anyone can come out and say that we need to fix something that is not broken.
I believe that this was the last time we see selling to this extreme, profit taking is fine, but a collapse since 2:45 yesterday is completely overdone. If the shares had zero value, they would have stopped trading 5 years ago.
This is a goldmine. What we need here is someone, or something to come out and support FnF. I have seen nothing but bashing for the last month. There has been no real news, just recycling the same old story (again and again), and people are listening to it.
We need to have these other bills come out and gain support. They have already reformed FnF, go look at the underwriting guidelines from 2008 and from today, they look completely different. I am not sure what these authors of this bill that the media pumps are up to, but they need to go fix real problems and recognize that what is not broken doesnt need to be fixed.
I would have to imagine that there are folks in DC that are alot smarter than the people on this board who bring up great reasons why FnF should be left alone because they are clearly working just fine.
This FMIC that is being proposed is a joke and will be very costly to put into place and will actually put the tax payer on the hook and protect the banks. Someone in DC will see right through this and laugh this bill away and then those of us that stuck around today in FnF will understand why we did.
STRONG BUY
Bill actually introduced 3/14/13.... what changed?
Congress
Bills
S. 563
S. 563: Jumpstart GSE Reform Act
Introduced:
Mar 14, 2013 (113th Congress, 2013–2015)
Sponsor:
Sen. Bob Corker [R-TN]
Status:
Referred to Committee
The bill’s title was written by the bill’s sponsor. S. stands for Senate bill.
Track this bill
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Overview
Summaries
Related
Citations
Status
This bill was assigned to a congressional committee on March 14, 2013, which will consider it before possibly sending it on to the House or Senate as a whole.
Progress
Introduced Mar 14, 2013
Referred to Committee Mar 14, 2013
Reported by Committee ...
Passed Senate ...
Passed House ...
Signed by the President ...
Prognosis
5% chance of getting past committee.
1% chance of being enacted.
Only 12% of Senate bills made it past committee and only 2% were enacted in 2011–2013. [show factors | methodology]
Cosponsors
3 cosponsors (2D, 1R) (show)
Vitter, David [R-LA]
Warner, Mark [D-VA]
Warren, Elizabeth [D-MA]
Committees
Senate Banking, Housing, and Urban Affairs
The committee chair determines whether a bill will move past the committee stage.
FDIC in relation to proposed "FMIC", protects who?
The FDIC was implemented to protect consumers/tax payers in the event that their bank that they had their savings account at (for example) went out of business and closed their doors.
This proposed "FMIC" looks like it is being set up to protect the banks in case the consumer/tax payer defaulted on their mortgage loan.
Please correct me if I am wrong, but this bill looks like it has the interest of the banks/lenders in mind in terms of who it is protecting, not the tax paying consumer, but wants to use the consumer/tax payers money to do it?
That is what is confusing about this bill as I read it. It actually looks like we are reverting the power and authority back to the same people that got us into this mess in the first place. Again, please correct me if I am reading this incorrectly.
There is no way that FnF could ever be abolished
The banks currently underwrite all of their loans based on FnF guidelines whether or not they are going to hold them in their portfolio(s) or sell them to FNF.
If someone was to take a poll of the loans originated since 2009, you would find that this is cleanest paper in the history of the mortgage business. I hope that when the opposition comes out from others in Washington (and we know it will)to the bill that was essentially re-introduced today through the media, because as far as I can read, this was introduced on 3/14/2013, that they will make others aware that FnF are running as clean a business from a risk perspective as possible based on their recent number of delinquencies (not very many) of loans originated since 2009. The days of subprime lending have been gone since 2008 when Country Wide, WAMU, New Century, etc. went out of business. If we are trying to fix that problem, this was literally fixed overnight by this little thing called capitalism. The market for risky paper went away when Baer Stearns and Lehman Brothers couldnt get a chair when the music stopped.
If there were no FnF, the interest rates would double and the housing market would crash overnight as banks only have FnF to guide them on how to lend and what to lend on. If it was their own depositors money that they were lending on, without the ability to sell the paper to FnF, a person would need to make 5 times their total debt obligations, have a credit score of 750 minimum, have 5 years worth of MTG payments, and have 50% equity in their home to even be considered for a MTG loan. Bnaks are very scared to lend their own money.
One thing that I keep hearing is that this new bill will protect the tax payer. Isn't this the same tax payer that has received mortgages that were written to be sold to FnF? Isnt this the same taxpayer that has saved hundreds of dollars a month in some cases by refinancing in the last 5 years? The tax payer needs to be protected from the banks having total control of the mortgage business, not from FnF.
Also, i am really sick of seeing the same news recycled over and over again through different media outlets. Ok, we get it, there is a bill coming to abolish the 2 pillars of our housing industry, but how many times can you run the same story? I bet if the authors of this bill were to take a poll of their own constituents, they would find out that 90% of them have either saved money in the last 5 years by refinancing made possible by FnF, or been able to purchase a home for their family because of FnF.
I believe what this "new" (actually presented in DC 3/14/13) is proposing is something that we already have in the form of FHA. That is a disaster, just compare the default rates of FHA to those of FnF and how much this "insurer" (FHA) is on the hook for right now.
I am not sure with so much going on on this planet why our decision makers are wasting their time trying to "fix" something that is not broken. The housing problem fixed itself when the appetite for bad paper went away 5 years ago. I think that FnF are doing a great job right now.
Just call your mortgage broker or your local bank and ask them what the mortgage/housing world would look like without FnF and they will either laugh and say huh?, or there will be long pause and then they would say that it could never happen, because it never will happen.