Mortgage News

The ongoing disaster in the mortgage industry is reaching new levels of distress. Just a few weeks ago, Fannie Mae and Freddie Mac were hitting new lows in their stock prices. Today, the stock prices are much lower.

Over the course of the past year, stock prices in Fannie and Freddie had fallen from the $65 to $70 range down to the $7 to $8 range. Today, they're down to the $4 to $6 range. Freddie Mac opens today at $4.39 a share, while Fannie Mae opens at $6.15 a share.

Looks like the latest news today is that Wachovia is the latest bank involved in cutting jobs due to the mortgage mess. I have a feeling that this is just the tip of the iceberg. There are a lot of lenders out there experiencing these kinds of problems, and I won't be surprised if we see a lot more of this coming down the line.

I'll be paying close attention to what the Banks of America and Chase Manhattans have to report in the coming months.

Today's Wall Street Journal features an article that reports that five of the biggest credit unions in America are getting hit by the mortgage mess. They lost a combined total of $5.7 billion in unrealized losses, meaning that the houses their mortgages are on have lost $5.7 billion in value without being successfully sold and the mortgage paid off.

In a new twist on political gamesmanship, Congressman Henry A. Waxman, D-CA, chairman of the House Oversight and Government Reform Committee is quoted in a Washington Post article today suggesting that the White House might have played a role in the recent decline in share prices of Fannie Mae and Freddie Mac. It quotes a letter from Waxman to Freddie Mac Chief Executive Richard F.

The unsurprising news that Freddie Mac lost money for the fourth straight quarter was also accompanied by more bad news for Freddie's stock holders. The divided was cut from 25¢/share to 5¢/share. The surprising news is that they're still getting a dividend at all. One would think that when you're bleeding red all over the place, you'd be looking to cut costs, including dividends. In theory, a dividend is a share of profits. So why pay dividends when you're losing money?

Business Week is reporting that there are hedge funds run by former Wall Street and Lending company executives which are buying up delinquent mortgages and attempting to refinance them to help the homeowners save their properties from foreclusure. It's a risky business, and ultimately they can't always help everyone. Some delinquencies are so bad that the only thing they can do is to buy up the paper for a fraction of its face value, foreclose, and then try to resell the property at lower prices.

It is not receiving any significant attention, but the new bailout bill passed by Congress and signed into law by President Bush includes provisions for establishing a national licensing program for mortgage brokers. Representatives can now look forward to spending even more time than before studying for and taking exams, as well as meeting requirements for refresher courses. What is not clear is why we should believe this will actually accomplish anything constructive.

The U.S. government's bailout of the housing and lending industries has begun, as expected. President Bush has signed into law a bill which gives the U.S. Treasury the power to buy share in Freddie Mac and Fannie Mae, which investors in those two companies had long counted on. Whether this will actually help restore their investments is another question entirely. My guess is that it won't, but crazier things have happened, and I don't dare rule it out.

In the midst of the huge Fannie Mae and Freddie Mac bailout story here in the U.S., it is easy to forget that other countries have mortgage markets that are similarly tied to the vagueries of fiat money systems, but it should not surprise us that they may be facing their own financial crises very soon.

The takeover of two more banks by the U.S. Treasury Dept. this week led to the Washington Post revealing a little discussed figure that caught my attention. According to their article, "The FDIC insures deposits at 8,494 institutions with $13.4 trillion in assets." That $13.4 trillion figure is alarming, because the current national debt totals roughly $9 trillion, and over-valued assets of Fannie Mae and Freddie Mac total roughly $5 trillion.

I just saw a little editorial piece in the Wall Street Journal that made me sick. The editorial starts off well, saying, "In the rush to bulldoze the Fannie Mae-Freddie Mac and housing bailout bill through Congress this week, scant attention has been paid in Washington to how the U.S. system fell into this hole."