Flashback 1999: Clinton Admin Pressures GSE

A colleague of mine recently passed an interesting old New York Times article on to me. Here are two very interesting and telling excerpts. Foreshadowing!!

Excerpt:
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

Excerpt:
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Anyone think that the risks were unknown? Talk about self-fulfilling prophesy - this is classic.

Fannie & Freddie Update

Excerpt for an article I came across today:

Posted on: August 19, 2008

Adam Brown

---

While on vacation this previous week, I had the opportunity to take a hike with a current employee of Freddie Mac. As much as I could tell she wasn’t looking to have a conversation about work in the middle of Vermont’s green mountains, I could not help but push the subject. As we chatted, she filled me in on some of the details of the past few months. While she didn’t cover much I did not already know, one thing did surprise me. Finishing our conversation, the woman looked at me and said, “I’m not sure I’m going to have a job in six months.” She then continued up the mountain unperturbed, as if the information was nothing new to her. I was left to ponder this incident for the remainder of my vacation only to return home on Monday and see Fannie and Freddie back in the headlines.

$4 Gas and Countrywide CEO's Special Mortgages to Fannie Mae Peeps!

Interesting news weekend to say the least. The national average of a gallon of gas has reached the $4 dollar mark - not a big surprise but sure to rattle the Monday morning markets.

On the mortgage front there was an interesting article in the WallStreet Journal about Countrywide's CEO Angelo Mozilo playing favorite's with a couple bigwigs from Fannie Mae. Yes, you read that right. Furthermore, one of them is an advisor to the Obama campaign.

Excerpt:

Countrywide Friends Got Good Loans

By Glenn R. Simpson and James R. Hagerty

Countrywide Financial Corp. makes mortgage loans through a vast network of offices, brokers and call centers. But a few customers have gotten their loans a special way: through Countrywide Chief Executive Angelo Mozilo.

These borrowers, known internally as "friends of Angelo" or FoA, include two former CEOs of Fannie Mae, the biggest buyer of Countrywide's mortgages, say people familiar with the matter.

One was James Johnson, a longtime Democratic Party power and an adviser to Sen. Barack Obama's campaign, who this past week was named to a panel that is vetting running-mate possibilities for the presumed nominee.

This brings a couple things to my mind:

1. Is Bank of America sure they want to buy Countrywide?

2. Do You Want to Vote For Someone who's campaign employs advisors with less than credible ethics? Brings to mind that old saying "You Are Who You Hang With".

3. Why hasn't Mozilo been subject to some hard core scrutiny. Mark my words where there's smoke there's fire. I'm sure this isn't the last we'll hear about his questionable business ethics.

Home Saver Advanced - Loan Workout Assistance

News Release

February 27, 2008

Fannie Mae Introduces HomeSaver AdvanceTM;
Mortgage Workout Option Designed to Help Delinquent Borrowers

WASHINGTON DC -- Fannie Mae (FNM/NYSE) announced today that, as part of its HomeStayTM initiative to support its mortgage servicers as they provide at-risk borrowers with refinancing and loan workout assistance, it is offering a new option -- HomeSaver AdvanceTM.

HomeSaver Advance is designed to help qualified borrowers bring delinquent mortgages current and keep their homes. With HomeSaver Advance, servicers can now offer an unsecured, personal loan that will enable a qualified borrower to cure the payment default on a mortgage loan that Fannie Mae owns or has securitized, with fewer up-front costs and generally in less time.

"HomeSaver Advance will help Fannie Mae streamline its loss mitigation efforts and offer loan servicers a new way to cope with a delinquent loan," said Mike Quinn, Fannie Mae Senior Vice President for Single-Family Credit Risk Management. "Our research shows that most borrowers become delinquent because of a temporary life event or hardship. This loan can offer these borrowers another alternative, and help prevent a temporary setback from becoming a foreclosure."

HomeSaver Advance will provide Fannie Mae with an enhanced ability to manage credit risk and conserve capital during the housing downturn. Fannie Mae anticipates that HomeSaver Advance will reduce the number of delinquent mortgage loans it purchases from its mortgage-backed securities trusts and the fair value losses it would record in connection with those purchases.

HomeSaver Advance is just one of a variety of workout options that Fannie Mae's servicers can offer to borrowers. HomeSaver Advance is being rolled out and should be available to all Fannie Mae Servicers by April 15, 2008. Please click here for HomeSaver Advance fact sheet.

Fannie & Freddie Caps Lifted as of March 1, 2008

The Office of Federal Housing Enterprise Oversight (OFHEO) announced Wednesday that it would lift the restrictions on Fannie Mae and Freddie Mac's combined $1.4 trillion portfolios to give them the ability to buy more mortgages from lenders and support housing. The limit increase will go into effect March 1, 2008 and should add some needed liquidity to the mortgage market.