Fannie & Freddie Looking for BILLIONS more to stay afloat. 12.16.09
Meet Lewie Renieri, the man that invented mortgage backed securities. Wells Fargo to pay back TARP. AIG execs are sad... they need more money. A great tip from Gitomer. Now go out there and win!
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objective1: (December 17, 2009 5:00pm)
Another SOS from FNMA?
The same clucks who infringed the superfluous 1004mc form.
They are devoid of any moral authority.
Valuequestor: (December 17, 2009 11:36am)
Please note that I said share the pain, share resposibility. I am being more than fair. Who is being naive?
It's been awhile The real "Just Saying": (December 17, 2009 7:28am)
skip the 'your heartless" responses. Here is how we fix people paying back their mortgages.
We start today in the Kindergarten classes and teach responsibility, ethics and talk to our kids about "entitlement" and how bad it is for you when it comes to real life.
Now this will take about 20 years for them to become home owners but at the current pace of foreclosures it might be 20 years for a recover anyways.
Most of the people that own homes now are looking for banks to lower principle balances,government handouts, banks to lower interest rates, whatever it doesn't matter really they just don't feel like making their payments so our culture says "that is ok" now give me a hug. We should being saying to our neighbors who don't pay "you are a loser now pay because you are affecting everybody around you."
Another thought the banks should hire the MOB and I bet most of the people would find a way to pay their mortgage. Horse heads and pipes is the way to collect
Anonymous: (December 16, 2009 7:24pm)
Valuequestor... the banks will not embrace principal reductions because it is not their principal. They are merely servicers and they do not have a dog in the fight. Moreover, the logic you are employing is about blame. We all have to get past blame and it has to make business sense. Until consumers can look their servicer in the eye and tell them straight up... I walk your investor loses all the money, I lose nothing. A fair approach is to split the difference on losses. If not, who's loss is it? On a refi, the borrower got the money... on purchase money, the seller. Borrower walks, the lender loses real dollars. It is really that plain and simple. Yet, they want to make it difficult to modify a loan??? Makes no sense. They already lost the money, its about containing how much they lose. Consumers will meet them part way. They are greedy, they want it all... so more people are just walking.
Valuequestor: (December 16, 2009 6:59pm)
Without getting into a long drawn-out explanation. The banks should embrace the principal write down solution. Anybody with half a brain knows that they are responsible for the majority of the value lost in housing. Most competent appraisers were warning them what was coming. The greed of the "banksters" to borrow another posters term, was the primary reason for the devastating correction. I had a 35% cushion in my mortgage. Values fell 50% in my neighborhood. I feel very comfortable in sharing the pain. Who do you think pressured the rating agencies into giving their seal of approval.
DavetheWave: (December 16, 2009 4:47pm)
I've known both you guys for awhile, and I just have to tell you that I am amazed at what alot of drugs and twinkies can do for creativity. You two mortgage guys (along with Tim and the gang) have created a very informative(I think you make some of the sh-t up) and entertaining site. Very cool. I enjoy watching your presentations. Hats off to you. and please...don't ever let Brian dance again. I lost my lunch.
brian tbws: (December 16, 2009 4:31pm)
The term I've heard is "strategic nonpayment." Thats where people can, but choose not to make their payments. I'm just saying 150k upside down on someone that makes 50k per year is a bitter pill to swallow. Not to mention you have the government and the media telling you "its not your fault." I dont necessarily agree in lowering balances but I think it would help. Just my 2 cents.
Sledhead: (December 16, 2009 3:56pm)
As usual most banks and staff assist the wrong borrowers. My borrowihg client with 200k cash savings who is dentist, and a 780 fico easily qualifed for a mod and canceled their 4.875% loan. The mod rate was 2%. they are happy as larks! Nice work by Wells Fargo!
Gmoney: (December 16, 2009 2:01pm)
Hey, about the baby names, MILEY is the name of a horse trailer.
GODLIKE: (December 16, 2009 1:14pm)
I agree that most of the issues are people having trouble making the payments and it's not a value issue. So basically anything that strengthens the job market or drops monthly payments helps. Several articles I've seen say the same 7 areas that had the value issues and began this mess are the only areas still upside down. Most of the country are the same or slightly higher in value. I now the Texas area is mostly up in values.
James the Appraiser: (December 16, 2009 1:01pm)
IT IS SIMPLE, I will be glad to pay my full principal, I did agree to do that. Just layer my interest rate from 5.875 to 4% and it saves me and my house.
BoKnowsClosings: (December 16, 2009 12:10pm)
I don't know what the solution is but I can say that my home is worth $150K less than what I paid and I am totally upside down and cannot refinance. I would be so pleased if my servicer would 'adjust' my interest rate lower so that it would be less painful (from 6.125%, which isn't really horrible). But they know they've got me and I can't do anything so what is their incentive? Besides, I am current and pay on time so no need to work with me vs. someone who is behind several months. Meanwhile, I was foolish enough to buy while my old home was for sale--it didn't and now I'm a landlord. Yes, my choice to end up with 2 homes/2 mortgages, but again I'm paying them monthly. BUT it would be great if I could realign my payments a bit to work on other debts. But that's my responsibility and my choice. What about the 'gimme' people out there? They would have already walked away. Sad commentary on the USA.
RealtorRob: (December 16, 2009 11:49am)
Lower principal? Really guys, the problem with foreclosures in most states is the fact that homeowners are in trouble making PAYMENTS, not selling. The solution is strengthening the job market, not reducing principal balances. If a homeowner can't make their payments, how does the reduction in principal balance help people KEEP their homes? It just makes it a pre-foreclosure sale where the bank doesn't have to do a short sale, or gives them the ability to refinance into better terms...but if they don't have a job, or their DTI has increased, as it usually has on struggling borrowers, they can't refinance to lower rates anyway. The solution is to go forward with the foreclosures and let the market correct itself. QUIT BAILING OUT PEOPLE WHO ARE IN TROUBLE IN SPITE OF THOSE WHO AREN'T. I guess if you reduce the principal no ALL home loans it would work, but what about the 20-30% of the country who don't actually have a mortgage? Not a good idea.
lookingforsolutions: (December 16, 2009 11:29am)
lower the principal balance across the board on all primary residence mortgages. let the investors take their "advisors" to court to recoup their loses. granted some people should not have gotten loans, now we need to move forward and correct the over inflated values that all these mortgages were written on. investors know that their is risk and reward in any investment, just because someone offers you a way to make alot of easy money doesn't mean that their wasn't any risk involved. investors made alot of money during the real estate bubble now they need to take theirs losses and reevaluate their investment strategies. it will hurt the world ecomomies, could even destroy a few (even our own). you true capitalist need to let the capital market work on its downside not just on the upside when your making money hand over fist because the fox was guarding the hen house. lets more forward and learn some valuable lessons that we should of learned from the great depression.
the truth hurts: (December 16, 2009 10:26am)
Indiana Mortgage broker..i bet they are doing this so they can sue the owner for 2 judgements to do collections on both the 1st and 2nd after the foreclosure. greedy banks !!!!!!!!!!!! more greedy lawyers !!
loaner55: (December 16, 2009 10:15am)
Barry456....that is too simple for the government to enact. If they did that people might think " wow, we don't nee all those politicians if it's that simple". Plus they haven't figured out how that would make anything for them!
Barry456: (December 16, 2009 9:46am)
The solution is simple. Lower the rates and extend the length of the loan. People can pay and the bank still gets their money.
**IMPORTANT**: (December 16, 2009 9:40am)
Wells Fargo is suing itself. No wonder why they haven't been able to pull their head out. Cut and Paste this link http://www.foxbusiness.com/story/markets/al-lewis-wells-fargo-bank-sues/
Indiana Mortgage Broker: (December 16, 2009 9:11am)
If anyone follows Minyanville I hope you didn't miss the following article/video that surmises the real estate bubble. I agree with the author's premise totally. http://www.minyanville.com/articles/real-estate-bubble-century-21-realtor-economy-minyanville/index/a/25925
Spur: (December 16, 2009 8:55am)
Let Freddie and Fannie fail so all we have is socialized mortgage lending like FHA. Lets go ahead and slit our own throats.
GaryP: (December 16, 2009 8:45am)
GodLike: Fha has already taken the place of Fannie and Freddie for about 30% of borrowers. That number continues to grow. However, Mr. Donovan and his co-horts are doing what they can to shut that down too. We're in danger of FHA going the way of the Fannie/Freddie first time buyer programs. What happens to the industry, real estate and mortgage, when a large percentage of first time buyers can't buy a home. That would be like shutting down the suppliers of raw materials to a manufacturing industry. Without first time buyers, the move up buyers go away, and eventually the US evolves into a nation of renters. Boy, I'm starting to sound like an alarmist this AM!
GaryP: (December 16, 2009 8:40am)
Socal Appraisal Gal: OK, now do you want the good news? If the folks in DC have their way, the big banks like Wells will be the only ones left standing in the industry when everything is said and done. It would make their lives so much esaier if they only had 4-5 ranks to regulate instead of all these pesky and "unethical" brokers and mortgage bankers. So much for the idea of doing away with "too big to fail," much less something called competition. That would just be way too inconvenient. Wells and BoA already control 40% of the secondary mortgage market. All the folks in DC have to do is take away YSP and SRP and we are left with hourly people working at the big banks and rubber stamping loans. See how convenient that would be? Of course all of this is being done in the name of "consumer protection." In my opinion, the real problem is that all us independent mortgage folks simply don't contribute enough money to their re-election campaigns.
Barney_Frank: (December 16, 2009 8:36am)
Getting foreclosed? Call the White House. This guy did: http://massrealtynews.weebly.com/
GODLIKE: (December 16, 2009 8:33am)
You say let Fannie and Freddie burn but tell me what would we do without them? What's waiting in the wings to take their place? Nuttin! As to more bail out money - why? As you said, they aren't making any loans so why do they need money?
GODLIKE: (December 16, 2009 8:28am)
A customer sent me the Lewie Ranieri story yesterday and it got me to thinking. The real problem with this type of solution is that it penalizes the people who pay their bills. In our area of the country it would be giving people money to put in their pocket not reduce their negative equity since we don't have a depreciation issue.
MortgageAngel: (December 16, 2009 8:01am)
I don't see how reducing balances would be helpful. If anything it would drive property values lower. People need jobs and until that happens, it ain't gonna happen.
ThePhoenix: (December 16, 2009 7:57am)
The story on Lewie Ranieri is more of a promotion of his idea to make money, not some ground breaking idea to save consumers. He has raised in excess of 800 million to buy loans from investors at steep discounts. Not to seem too cynical, but why don't the banks just do that directly with their existing loans which would result in a lower loss to them. After all, if Ranieri can buy at a discount, do a principal reduction for the borrower, repackage and sell at a profit, the current lender can save that "profit" by doing the same thing for the borrower. Which is where the problem lies anyway... the lenders are unwilling to sell the loan... they want to foreclose and ruin the credit of consumers to punish them for not making their payments.
Texas Gal: (December 16, 2009 7:52am)
I think that Bryan should dance more often....
Socal Appraisal Gal: (December 16, 2009 7:44am)
Pretty amazing so where did you think these banks come up with the money? Gee do you think stealing out of the hands of consumers via taking the profits from appraiser's, mortgage professionals, and real estate agents may have had anything to do with it? Lets see Wells Fargo (the snake oil company with the little wagon) is a part of First American which produces Core Logic that has the investor thinking they are go to source for value fortheir investment. Core logic pays appraiser's from outside the properties state $30.00 to a to look over the inacurrate AVM First Am/Wells Fargo produced & comment on it not the appraisal. Not mls, public records, title..No just their inacurrate AVM data. This is not a review this is a way of making money at the expense of all us consumers. Wells Fargo also charges the consumer a large fee for the appraisal paying one of the worst fee spilits in the industry to the appraiser..getting my drift anyone? Big fat cat banks still took advantage of YOU!
Seriously Speaking: (December 16, 2009 7:44am)
At what point do the borrowers take accountability for THEIR actions?
In any other time, if the roles were reversed imagine the outcry and rage if a lender came to a borrower and said "wow you just profited 100k on the house we lent you the money for 6-12 months ago and we want some extra"! But since it is role reversed and YES they do have a part to play for allowing and funding loans that truly should have never made it through the system, BUT not every loan out there deserves a mod and shuffling through this mess (with numerous incompetent and untrained people) is causing more harm than good. This opens the door to numerous scam "foreclosure and mod" companies that are preying on those in need of help. Overall the situation is dire but how do you implement a "write down" of an already agreed to note that multiple investors have given good money for? We all know there will be many NON deserving people with their hand out looking for a "bonus" while those in need get the shaft. Sad
GMS: (December 16, 2009 6:56am)
Ranieri has the right idea but is he to late. When this all started to unravel, (note: this is very general for space reasons) if the govt would have bought up the troubled MBS' at a discount lets just say 70%, let all FHA approved lenders refinance the borrower at 85% of original debt at 4.5% fixed 30 yr with all loans having a $20 MI added to payment(there is your principle reduction of 15% across the board)allowing 3% of original loan amount financed in with the 85%, sell the new pools to stable financial institutions at 94% of face value (discount of 5% of original loan amount) giving the financial inst an immediate 6% gain, then the remaining 7% gain is used to set up a pool (along with the $20 MI pmts from all the loans) to insure all these loans. Who takes the loss, the holders of the MBS that are taking a loss anyway. Let them go after the rating agencies in civil court for selling them AAA rated pools of sub-prime paper.
Eddieinab: (December 16, 2009 6:42am)
Sorry 3) Were is "think you are having a bad day?"
Eddieinab: (December 16, 2009 6:41am)
1) Brian Can't Dance
2) Let Fannie Fail
3) We is "think you are having a bad day?"
Broker in RIC: (December 16, 2009 6:40am)
Gary P hit the nail on the head in his post. Blaming MBS for the downfall is like blaming a car for a drunk drivers auto accident. The rating agencies were the drunk drivers in this case. Don't blame the automobile. (and don't people who drive drunk usually end up in jail -- why not anyone from the rating agencies? hmmm....)
dd: (December 16, 2009 6:27am)
Lewie is 100% right! It is not right and moral to take someones home if it can be saved by a write down. Why would I take someone's home and either foreclose or short sale it to someone else at a price the original homeowner could pay to keep it? This is insane if the numbers come out even or better! I have personally seen serious illness, stokes, heart attacks, and suicide from the stress of doing it the way it is currently being done. Bascially murder by bank if you ask me. If Ranieri has found a way to make money in the process of doing the right thing, how do I get to work with him?
Processing gal: (December 16, 2009 6:23am)
Brian dances better than most I have seen. Love this daily news. It is simple enough for us to understand forgetting all the "fluff"
GMS: (December 16, 2009 6:13am)
Gary & Utah. In regards to your comment on experience in DC. Most of the DC elite have either never worked in the private sector or FDR was president when they did OR they were attorneys. How about the Presidents cabinet, his trusted advisors, the people he counts on to help him fix the problems, not just the mortgage issue but ALL issues. What percentage of a presidents cabinet has previously worked in the private sector? Of the previous 18 presidents it has ranged from 30% (Kennedy) to 57% (Eisenhower) with an average of 46.17%. Now these are people that actually worked in the PRIVATE SECTOR. Current administrations cabinet has only 8% of the cabinet has worked in the private sector. Comforting to know we are in experienced hands. Like letting the girl at the starbucks counter check me for prostate cancer.....OK I could have come up with a better analogy but you get the idea....
Just Saying: (December 16, 2009 6:04am)
@Mortgage Girl...correction...proof that Brian can't dance!
Just Saying: (December 16, 2009 6:03am)
@GaryP--yes, the book pointed at many people outside the realm of Wall Street and many are to blame for the mess. It is just a shame those people are not being called onto the carpet. I will, however, retract my broad statement regarding the MBS as I know it has its place in the grand scheme of things. I will not retract any comments made about Wall Street firms and the direct link between the meltdown and their involvement. Unfortunately, many of the companies that are no longer in business were underwriting to the guidelines established by the firms selling the securities on the secondary market, yet those companies are made to be the villain when all the chips settled. Not to be a Negative Nick, but it will be a long time before any recovery is seen in the industry due to recent legislation.
Mortgage Girl: (December 16, 2009 6:02am)
Today's post.....proof that white men CAN'T dance! hahahahahaha
GaryP: (December 16, 2009 5:34am)
Utah, You touched on the very point of the whole "clean up" campaign. Decisions are being made by people that are clueless as to how the industry actually works on the nuts and bolts level. I'll throw character such as Cuomo, Frank, Dodd, and Donovan into that hat. Its my opinion that they all over estimate their knowledge of the industy. When was the last time you saw an actual LO testify before Congress about what is really going on and possible solutions. Do you really think Ken Lewis or Sheila Bair has a clue as to what is going on on the ground level, down here in the trenches where you and I exist? When was the last time thay sat down and talked to a first time buyer couple with 630 FICO scores and $4K in the bank? I made the point over a year ago that the pendulum had swung to far and that it would eventually reach a new equilibrium that we would get accustomed to. However, I'm still seeing ever tighter guidelines on an almost weekly basis that is gradually strangling us
Utah Mortgage Man: (December 16, 2009 5:25am)
I say that Frank and Brian should be put in charge of the mortgage industry. The economy and mortgage industry in particular is FUBAR. They certainly could not screw anything up any worse than the inmates running the asylum that exists now (Barney Frank, AIG, greedy executives,Wells, BofA,CITI, the list goes on).
GaryP: (December 16, 2009 5:19am)
Just saying, I would suggest that you not paint all MBS with such broad strokes. In my opinion, not all MBS were bad products. A large share of the plame goes to the rating agencies that rated a lot of subprime and other risky products as AAA grade paper. Of course that just takes us back to the folks at AIG and other insurers whose worthless CDO's provided a false sense of security for these products. If you read Chain of Blame you know that you can't swing a dead cat without hitting someone that was involved in the crisis. There's plenty of blame to go around, including several folks in DC that are now tap dancing as fast as they can and claiming that they are going to clean up the mess that they have quite suddenly forgotten that they helped create.
Just Saying...: (December 16, 2009 4:47am)
First...Brian, stop dancing. Second, Lewie Renieri was mentioned in "Chain of Blame" by Paul Muolo. The book goes into great depth detailing the decline of the mortgage market while pointing the fingers in the appropriate directions. Fact of the matter is Wall Street firms had no business in the mortgage market and the MBS should have been made illegal by the SEC. Many will argue the MBS caused the boon in the market (which it probably did) and was a good thing, but it led to overvalued securities being sold globally. I find it interesting the bank's CEOs are now being told to limit the pay to $500k, but the lowest of low positions at the Wall Street firms still get bonuses that far exceed the CEO cap....just saying. On a side note...the Senate is one vote closer to passing the health care reform that will bankrupt our country...call your reps and let them know how you feel. You think the mortgage industry is bad now...just wait.
Ex full time Realtor in Florida: (December 16, 2009 4:30am)
Read the Lewie Renieri CNN article yesterday and thought finally someone gets it!! It's the value stupid! I just want to know why the government didn't figure this out two years ago. If they had we would have been well on our way to a healthy real estate market, which would have meant a healthier overall job market.
Dweebster: (December 16, 2009 4:15am)
it is one thing to say "reduce the balance" of home loans as a solution for the present malaise. . . but the bigger question that needs answered is: who will pay? if it is the bondholder, who would ever buy another MBS without pricing in a huge risk premium? If it is the taxpayer, then we have not even started to experience regulatory pressure. Either way, we would see much narrower underwriting guides and stricter underwriting standards as only those that don’t need any money would qualify for loans? Beware of the unintended consequence and be careful what you ask Santa for this year. 
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