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NEW -> Contingent Buyer Assistance Program
<p>Freddie Mac's primary method for making money is by charging a guarantee fee on loans that they have purchased and securitized into <a title="Mortgage-backed security" href="http://en.wikipedia.org/wiki/Mortgage-backed_security">Mortgage-backed security</a> bonds. Investors, or purchasers of Freddie Mac MBS, are willing to let Freddie Mac keep this fee in exchange for assuming the credit risk, that is, Freddie Mac's guarantee that the principal and interest on the underlying loan will be paid back regardless of whether the borrower actually repays.</p>

<p>Freddie Mac securities carry no government guarantee of being repaid. This is explicitly stated in the law that authorizes GSEs, on the securities themselves, and in many public communications issued by Freddie Mac. Despite this, there is a wide misperception that these notes carry some sort of implied government guarantee, and the vast majority of investors believe that the Government would prevent them from defaulting on their debt.</p>







“

Principal and interest payments are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac.

”













<p><a href="http://en.wikipedia.org/wiki/Federal_Home_Loan_Mortgage_Corporation">Source.</a></p>
 
<p><em>It was designed as a nation of law and principle and to have as little government interfernce as neccessary.</em></p>

<p>Interference or aid, it's a fine line.</p>

<p>Few would question the allocation taxes to defend from a foreign sovereign entity from physically invading us bent on our distruction. The founding fathers understood that risk well.</p>

<p>What of influenza? The Spanish flu circa 1918? If we had warning it was coming, should the government raise a 'militia' to defend against it? The founding fathers did not understanding the microbiology of disease. </p>

<p>Is it interference to defend against it or is indifference, a la George III, to say c'est la vie?</p>

<p> </p>

<p> </p>
 
You have no choice against an invading force, be it an army or influenza. We have a government to defend us. A mortage is not imposed upon you. You have a choice. Again, it is a private consensual contract and is none of the government's business, nor should it be. Please consider that with every bit of government aid you accept, you give up your individual liberty.
 
lm - Although not presently government guaranteed, there is legislation proposed to guarantee mortgages bought by Fannie and Freddie. Personally, I think it is just the large institutional banks profiteering at the expense of the taxpayer, and smoke shielding it as protection for the little guy. Nothing changes, eh? The politicians say, "We are here to save you". The voters will get exactly what they deserve.
 
<p>Interesting re-reading this older link from <a href="http://www.rgemonitor.com/blog/roubini/223214/">http://www.rgemonitor.com/blog/roubini/223214/</a> in light of the above discussion.</p>

<p><strong>Phase 1</strong>: rising mortgage defaults, homes prices start falling, sale volumes falls, housing starts and permits decline.





<strong>Phase 2</strong>: home-builders’ bankruptcies, housing starts and permits crash, substantial layoffs in construction and real estate-related fields (mortgage brokers, mortgage lenders, etc.).





<strong>Phase 3</strong>: substantial price declines in major metro areas, large rise in defaults of prime but low-equity mortgages.





<strong>Phase 4</strong>: large-scale government intervention to help households going bankrupt. This is a political phenomenon, so the timing and nature of this cannot be reliably forecast.</p>
 
The pmi companies distress has now affected the muni bond mkt in Miami. An airport project is now on hold. I guess without reliable guarantees, the interest rates would be too high.
 
Sheesh, you step away from a computer for a couple of hours and the next thing you know, <a href="http://ocbiz.freedomblogging.com/2007/11/09/state-seeks-to-revoke-sadeks-license/">the State is trying to revoke Sadek's license</a> (after the damage is done, of course).
 
<em>The Department of Corporation also accused Quick Loan Funding of charging borrowers $19,564 in excessive fees for loans recorded between Jan. 1, 2004, and June 30, 2006. An August audit by the department found that Quick Loan charged fees for title insurance when no policies were in borrowers’ files, according to the accusation.





</em>Eh, if they only knew. Oh, the stories I could tell.


<em>


Reached by phone Friday, Sadek said, “Why don’t you get a (expletive) life and don’t call me again?” He then hung up.





</em>I just hope he doesn't close his restaurants. I have a friend, that works around the corner, and we love to go there for lunch to get the filet kabobs. Mmmm... so good.
 
<p>Excellent link from the Oakdale thread pasted below. Now that's reporting. It's ironic that only the state funded news agencies (ex. NPR, BBC) seem to actually report. All the private dudes are just ratings chasing entertainment news co's.</p>

<p><cite>Comment by xy31<a href="http://www.irvinehousingblog.com/2007/11/09/ordinary-oakdale/#comment-28737"></a></cite> </p>



2007-11-09 19:42:46



<p>Really good article about the U.S. housing slump and economy as a whole on BBC:</p>

<p><a rel="nofollow" href="http://news.bbc.co.uk/2/hi/business/7078492.stm">http://news.bbc.co.uk/2/hi/business/7078492.stm</a></p>

<p>The graph at the very end is scary!!!</p>


 
<p>Personally, I am an optimist. Professionally, I am a pragmatist and realist (not to mention a little paranoid). Financially, I am conservative. Politically, I am a liberal. </p>

<p>I think that a good lawyer (at least a dealing in litigation) has to be a little optimistic. Too pessmistic and you will not have any clients.</p>
 
<a href="http://economist.com/finance/displaystory.cfm?story_id=10113339">CDOh no!</a>





<em>IT WAS not a good omen. This week Lewis Ranieri, a pioneer of mortgage securitisation in his “Liar's Poker” days at Salomon Brothers, sold his property-financing firm because the subprime crisis had cut it off from fresh debt. If the industry's godfather can't navigate the storm-tossed markets, what hope its greedy children?</em>
 
<p>Not a housing headline--but I saw it from my front yard.</p>

<p>A launch of a big delta 4. First the sky lights up behind the trees, then you see the fireball, then after quite a long time you see and hear the rumbles. </p>
 
<p><a href="http://biz.yahoo.com/ap/071110/mortgage_insurers.html">MGIC, PMI Group and Other Private Mortgage Insurers Dragged Down As Delinquencies Rise</a> </p>

<p>"In the short term, regulators and analysts say they aren't concerned about the biggest insurers staying in business. </p>

<p>"We're not worried about it today. You can ask us tomorrow. It may change. But right now, it's not a high priority," said Gail Madziar, spokeswoman for the Michigan Bankers Association. </p>

<p>And at least one competitor is making a big bet on the industry's survival. Shares of MGIC and PMI Group Inc. surged Friday after mortgage insurer Old Republic International Corp. disclosed in a Securities and Exchange Commission filings that it had accumulated a 15 percent stake in PMI Group and an 11 percent stake in MGIC."</p>
 
<p>Is Old Republic nuts? What do they know that we don't?</p>

<p>Also, I wonder why the mtg insurers didn't take a more active interest in the quality of the appraisals? They still aren't I assume.</p>

<p>Same as I have always wondered why house insurers never have taken much interest in the quality of construction.</p>

<p>Which reminds me, nobody answered when I asked if any of you had earthquake insurance? Is it even available?</p>
 
<p><em>Same as I have always wondered why house insurers never have taken much interest in the quality of construction.</em></p>

<p>As an insurance company, you want high claims. High predictable claims are good. High predictable claims means a steady stream of business. A steady stream of business with an underlying high cost that can be used to justify higher premiums. Higher premiums with high underlying payout and economy of scale from high volume equals high large profits with predictability.</p>

<p>The bonus upside? Those higher premium stay when the market first gets better resulting in lower payouts with higher premium generating humogous profits.</p>

<p>Consistency in failure is the manna of the insurance industry. The more regularity in the events they insure, the more predictable and assured their demand for the services with a structure profitability on it.</p>
 
<p>I guess that's why they were so shocked by hurricane Andrew. And the 2 years of the 8 storms. Before that claims were low and they were competing themselves into oblivion. There are few big house fires in South Florida because on the CBS construction on a concrete slab. For a while there were those horrible aluminum studs. . .but they don't burn. I don't think sheetrock burns, so that leaves the trusses and the plywood roof and the stuff inside. </p>

<p>I still think they would be wise to check out new construction.</p>

<p>And again, how's about earthquakes?</p>
 
<p>Same problem with earthquakes. To unpredictable. Actually, not unpredictable, just not damaging event consistently. </p>

<p>Sure, we're going to have them, regularly, but they're localized. The average person will experience an earthquake that does serious structural damage to their home once every 100 years. Hurricanes are the same problem. </p>

<p>As for earthquake premiums, to insure a $1,000,000 two story, wood frame built circa 1970s, from $4000 a year. That BTW, is with a 15% deductible.</p>
 
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