A Wolf in Sheep's Clothing : The Death of Fannie and Freddie

By
Education & Training with The Real Estate Mart of Tennessee, Inc. TN LIC# 290452

                                               wolf sheepwolf

Can't you see it coming? Somebody's pulling the wool over your eyes.

Could this attempted government buyout of Freddie Mac and Fannie Mae actually be an attempt by the government to end the privatization of the oversight of mortgage backed securities and merge the two private corporations into one government owned corporation that we call "Ginnie Mae", the Government National Mortgage Association", and thus take control of housing financing?

After all, Freddie and Fannie control over 5 trillion dollars worth of 12 trillion dollars of the total U.S. housing financing market. That buyout would give the government control of the industry, a lions share, and some stalwart control over your property and your investments.

And just what does Ginnie Mae do, you may ask?

Ginnie Mae basically does the same thing that Fannie Mae and Freddie Mac do, but under the watchful eye of the government and the United States Department of Housing and Urban Development, HUD.

GNMA, or Ginnie Mae, supposedly guarantees, backed by the pledges and money of the government, the full and on-time payments of all of the monthly pricipal and interest payments of mortgage backed securities to the registered holders of these investments.

Mortgage backed securities, or MBS as we call them, are issued through the oversight of private investment firms like savings and loans and mortgage bankers and marketed with the assistance of security brokers. These securtities are actually large pools of residential mortgages of a large variety, including fixed rate conventional and hybrid adjustable rate loans, that are guaranteed or insured by the Federal Housing Administration (the FHA), the Veterans Administration (the VA), and the Farmer's Home Administration (the FmHA) 

The pickings are ripe for investors looking for bargains just like the one Bank of America got with that first 2 billion dollar infusion, and just like the one JP Morgan-Chase got by setting a Bear trap.

"But Grandmother!  What big ears you have," said Little Red Riding Hood as she edged closer to the bed.

"The better to hear you with, my dear," replied the wolf.

"But Grandmother!  What big eyes you have," said Little Red Riding Hood.

"The better to see you with, my dear," replied the wolf.

"But Grandmother!  What big teeth you have," said Little Red Riding Hood her voice quivering slightly.

"The better to eat you with, my dear," roared the treasury secretary, Chairman Bernanke, HUD and the President.

And that's the story of how the U.S. government took control of all private property and Fannie Mae and Freddie Mac became Ginnie Mae. 

If this buyout is successful and approved by the Senate is it also intended to produce the gradual demise of the right to own private property in America?

Watch out for the wolf !!!

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David Saks


 

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Rainmaker
1,177,668
David Saks
Memphis, Tennessee
The Real Estate Mart of Tennessee, Inc.

Great to hear from you, Matt !

Fannie Mae managers were responsible for a bucketload of fraud over a six year period and doctored earnings so their execs could pirate millions of dollars in bonuses. That was just two years ago.

Most people have already forgotten the 400 million dollars in penalties that were levied by the Securities and Exchange Commission regulators just a few months ago.

They didn't exercise proper control. CEO Franklin Raines and Chief Financial Officer J. Timothy Howard, were busted and kicked out.

Ginnie Mae's been dancing with Fannie for some time now.

Freddie has always considered three areas of underwriting, whether traditional or automated, and that includes collateral, credit reputation and the ability to pay back the loan. The automated program Loan Prospector may not have come under the scrutiny of watchful human eyes like it should have. Credit reputation and credit scores weren't concomitant when the underwriters were reviewing loans in many cases over the last few years. Now the fiddler's playing a mournful tune. I agree with you, Matt. Greed was the motive behind the reprehensible acquisitiveness and insatiable desire for wealth. 
 
It was also alleged that two transactions with Goldman Sachs screwed up 100 million bucks and that the books were cooked to hide it.

The companies earnings were misstated by nearly 11 Billion Bucks between 1998 and 2004, and paid out nearly 53 million bucks in bonuses during the same period according to the OFHEO allegations.

Maybe they've been run more like hedgehog funds, Matt ! :-) hedgehog

Any strategy used to offset investment risk never eliminated the possibility of future losses for their investors. Although Ginnie's support of the Tandem Plan gave Fannie a lot of confidence with high-risk, low-yield loans. Quite a cushion. One company controlled by HUD and the other issuing common stock as a quasi-government agency. 

They've always been kissing cousins :-)

Hope your having a great week. Wish I could be with you and all the guys in San Francisco next week. I'd have to find someone to feed Max, my piano playing cat. Hope all is well, Matt !

July 17, 2008 02:44 PM
Rainmaker
1,177,668
David Saks
Memphis, Tennessee
The Real Estate Mart of Tennessee, Inc.

...correction...53 million in bonuses.

July 17, 2008 02:42 PM
Rainer
29,614
Andy Laughlin
ConnectRealty.com

Nice picture...haha. Thanks for sharing the insight.

Andy Laughlin

Connect Realty

July 22, 2008 12:19 AM
Rainmaker
1,177,668
David Saks
Memphis, Tennessee
The Real Estate Mart of Tennessee, Inc.

Glad you got a nice chuckle from that goofy looking wolf, Andy. Good to hear from you.

July 22, 2008 02:43 AM
Rainmaker
1,177,668
David Saks
Memphis, Tennessee
The Real Estate Mart of Tennessee, Inc.

...btw...not a gerbil

August 24, 2008 02:11 PM
Anonymous
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Rainmaker
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David Saks

Memphis, Tennessee
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