An older article but still interesting. The writing was on the wall even then. This was a train running full speed without any brakes, and what FRE couldn't do other mortgage lenders could and would. The House of Cards by David Faber illustrated how the bankers, and Wall Street Firms, to include Mutual Funds like Washington Mutual took on the kind of risk that put not only their buisinesses at risk gambling, but investors capital for profit was mind boggling. The more speculated profit the higher their compensation pkgs & bonuses. Its hard to imagine that the US taxpayer is now the reponsible party to repair the damage that most of these individuals involved made millions, tens and hundreds of millions, and even billons manipulating the market, even some operating hedge funds, like GS, and Aig's department who sold insurance (CDS's) who had no collaterol to back them to the tune of $440bn.
ALAN ZIBEL
The Associated Press
Thursday, August 30, 2007; 4:28 PM
WASHINGTON -- Freddie Mac, the nation's No. 2 buyer and backer of home mortgages, set aside more than $300 million in the second quarter to account for bad loans, contributing to a 45 percent drop in profit.
The company is seen as source of housing market stability, along with its larger government-sponsored sibling Fannie Mae. Nevertheless, McLean, Va.-based Freddie Mac said on Thursday it recorded the provision for credit losses in the quarter due to problems with loans originated this year and last year.
Richard Syron, chairman and CEO of Freddie Mac, talks about the sub-prime lending crisis and its effect on the housing market during an address entitled "Strategies to Keep People in Their Homes" at the Housing Boston 2012 conference in Boston in this April 27, 2007 file photo. Freddie Mac, the nation's second-largest buyer and guarantor of home mortgages, said Thursday, Aug. 30, 2007 its second-quarter profit fell 45 percent as it had to record larger provisions on its books for bad loans. (AP Photo/Stephan Savoia, file) (Stephan Savoia - AP)
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It comes amid a deepening mortgage crisis nationwide that has bankrupted more than 50 lenders, many of which catered to borrowers with weak, or subprime, credit.
Shares in Freddie Mac closed down 5 percent at $60.07 on the news.
Freddie Mac said it is seeing higher delinquency rates on the East and West Coasts, and not just in areas of the Midwest with high rates of unemployment.
"For anybody who thinks the housing issues are confined to subprime (mortgages), that's clearly not the case," said Frederick Cannon, an analyst with Keefe, Bruyette & Woods.
Freddie Mac said losses from defaulted mortgages, while still a tiny portion of the company's mortgage portfolio, rose to 0.02 percent in the second quarter, and are expected to keep rising into next year. While those losses are worsening, they are still below average for the company, Chief Financial Officer Buddy Piszel said in an interview.
"Given the credit environment, we think we performed reasonably well," he said.
The government-sponsored company, which is returning to normalcy after an accounting scandal four years ago, makes money from interest payments on mortgages it holds on its books, and fees from insuring mortgages sold to investors.
It earned $764 million, or $1.02 per share, for the three months ended June 30. That contrasted with profit of $1.4 billion, or $1.93 a share, a year ago.
Revenue rose 4.8 percent to $2.26 billion from $2.15 billion in the quarter a year ago. The earnings results missed Wall Street expectations, with analysts surveyed by Thomson Financial expecting a profit of $1.16 per share on revenue of $1.69 billion for the quarter.
Freddie Mac and Fannie Mae were created by Congress to pump money into the $8 trillion home-mortgage market by buying home loans from banks and other lenders and bundling them into securities for sale to investors. Combined, Fannie and Freddie finance or guarantee about two-thirds of all U.S. home mortgages.
Democrats in Congress want to raise the individual limit for home mortgages that Fannie and Freddie are allowed to buy as a way to help stabilize the troubled mortgage market.
It is now at $417,000, well below the median home price in more expensive areas. This month, rates on mortgages that cannot be sold to Fannie and Freddie have soared, as lenders have demanded a premium for all but the safest mortgages.
Earlier this month, the companies' federal regulator rejected requests to ease the caps on mortgage loans or mortgage securities they can hold in their portfolios. Fannie and Freddie say doing so would help ease the market's troubles.
Chief Executive Richard Syron said the company is in "continuous discussions" with the regulator, the Office of Federal Housing Enterprise Oversight, about the caps.
The report was only Freddie Mac's second regular filing of a quarterly report in five years.
The company disclosed in mid-2003 that it had misstated earnings by some $5 billion, and top executives were ousted. Freddie Mac paid a then-record $125 million civil fine in 2003 in a settlement with federal regulators.
The company expects to file its financial reports within 45 days of the quarter's end by mid-2008.
In David Kellermans case he lived a pretty lavish life style as most of the insiders do. His life was tied money. He probably lost a fortune in Freddies stock, not to mention his loss in compensation, severance etc. Although I agree that he could have quit, sold his home if possible, and tailored his life to fit the reality that many Americans are facing, but money is the driving force for many if not most of these insiders, they eat, drink, and breath the millions they expect to be there, and to keep being there year after year. When the boat gets a hole in it and begins to sink and puts in jeopardy what possesses them, it makes them who they are, and thus devastates them to the point of nothing else to live for.
Fuld of Lehmans sold his $8 million home to his wife for $1.00 to protect it from lawsuits. The guy is a billionaire, but the greed is so profound in so many of these peoples lifes that it grows to consume them.............with Kellerman, he doing this may have protected his home, thru mortgage insurance and vehicle insurance and his additional insurance policies would pay his wife. The man was only 41 years old, just how depressed could one be at 41?........if this would have never happened to Freddie its unlikely that he would have chosen this route. He will never know now what doors may have opened for him?. Stress plays a role in everyones life, this is no exuse to end one life, nor the loss of money and things.
Then there is the others like Fuld, like Madoff that should be hung, wrapped in chains, then tossed off highest building in Time Square...........for them, Greed knows no bound for they lack a conscience, for they are deserving, and Washington and Wall Street has created this yellow brick rope to riches beyond imaginings, the result, 1% of the population owns 33% of all the wealth, more than 90% of Americans wealth combined.
AI
