Funny how these things happen, isn't it? Hmmm... let's see... as pontificated on February 18th, March 3rd, 4th, 22nd and 29th, today, September 5th, there are reports that the Treasury is near a plan to backstop Fannie Mae and Freddie Mac, effectively wiping out the shareholders and placing the burden of these completely insolvent institutions on the American Taxpayers' backs.
Pathetic. No... incredibly pathetic. Will common sense ever return to the American Pysche? I think not. Not until we hit rock bottom. Crack addicts hit rock bottom and either slowly rebound or die. This is where we are, America. Don't believe it? Think again. Our Government continues to feed us lies we know are not true but cling to in an effort to deny the oncoming pain.
As I said on February 18th of this year in Are Fannie and Freddie The Next to Fall:
"Fannie and Freddie have already posted MULTI-BILLION DOLLLAR LOSSES. All due to the fact that foreclosures on their books are at record levels. Now, let's add mortgages that are almost THREE TIMES THE SIZE of the median home price in the country. Mortgages that are either in default or about to go into default. Let's burden the GSE's with these toxic buyers. Oh yeah, and add on a heavy dose of depreciating assets.
What do YOU think will happen. It's clear to me, as it should be clear to everyone out there, that the government has absolutley NO idea what to do with this crisis. It's also very clear that Wall Street is not running for cover, but DIVING for it.
The thought that we are about to dump this problem on Fannie Mae and Freddie Mac should be a very sobering one."
Gee... I guess Bernanke, Paulson and company didn't see THAT one coming.
Following up on March 1st with Pulling The Plug on Fannie Mae and Freddie Mac:
"Who's passing out the crack pipe at these "meetings"? These firms are both upside down and insolvent. Their loan pipes are spiraling towards mass foreclosure on the subprime, Alt-A and prime side.
Increasing the loan limits and encouraging them to take more risk is going to help?
Not a chance, folks. This is a big set up for a taxpayer funded bailout, and yet another brilliant example of Wreckonomics....
The goal here is for these companies to take the bad mortgages off the books of the big banks (that are all teetering on the edge of failure as we speak). Once this happens, it will be much easier for the sheeple to accept a taxpayer funded government bailout.
Once again... the wicked web is weaved, and we are the flies getting the juice sucked out of us."
And, on March 4 the lunacy continued, as outlined in Big Ben and the Fed - The Setup is Here:
"The bailout, however nuts, is in the works. Bernanke goes on to say:
"The government-sponsored enterprises (GSEs), Fannie Mae (FNM) and Freddie Mac (FRE), likewise could do a great deal to address the current problems in housing and the mortgage market," Bernanke said. "New capital-raising by the GSEs, together with congressional action to strengthen the supervision of these companies, would allow Fannie and Freddie to expand significantly the number of new mortgages that they securitize."
"I urge the Congress and the GSEs to take the steps necessary to allow more potential homebuyers access to mortgage credit at reasonable terms. "
The groundwork is being laid. The fix is in, and they know it. We are going to pay for this mess, folks. Better get used to the idea."
As not to overdue the obvious, it pays also to read This Storm Will Have Many Eyes and Here Comes the Bailout, both from March.
The point? I think you get the point. The real estate party is over, baby. For anyone who believes it isn't, get a life. NO... really... get a life. Or a job, but those are going to get increasingly harder to come by as well.
What's going to happen? Well for starters, you can bet your bottom dollar that down payment requirements are going to increase. By the end of this year, you can count on needing a minimum 10% down payment on any sort of conventional type mortgage. Don't believe it? Zero down is gone. 3% down is gone. 5% down is currently available only in "non-declining markets" of which there are few. FHA is increasing their down payment from 3% to 3.5% on October 1st.
Wasn't it just about a year ago there was talk of lowering FHA's minimum requirement to "help" homeowners? What happened to that?
Things got worse. That's what happened. The bottom is nowhere near. We've got another 20%to go. Foreclosures are at a 30 year high, deliquencies are almost 9% on PRIME mortages, Alt-A is getting worse and subprime (remember that term?) is still going bad at a 25% clip. The inventory of available homes for sale is rapidly rising.
Now throw in hundreds of thousands of job losses and a broadly weakening economy. You get the point.
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