Freddie Mac release mortgage rate survey results showing average 30 year fixed mortgage rates for the week ending July 31, 2008 down from to the previous week 0.11% from 6.63% to 6.52%.
Freddie Mac Chief Economist, Frank Nothaft, said,
The Housing Bill containing the Paulson GSE bailout plan goes the House floor for a vote today. The bill as written by the Senate has a $4 Billion in grant provision for local governments to buy foreclosed homes directly. The President threatened a veto if this provision is in the final bill but has since retracted his opposition.
In the mortgage world government sponsored enterprises usually refers to Fannie Mae and Freddie Mac. These two stock exchange private corporations were created Congress to improve the liquidity of the mortgage market.
These two mortgage GSEs set national underwriting standards and insures the loans so Wall Street can sell pools of loans to large investors ie. insurance companies, foreign banks, etc.
Reuters reports the sovereign wealth fund of Kuwait, the KIA, will not be buying any more GSE debt. Exactly what Bernanke and Paulson were attempting to avoid last week, when they rushed to reassure the world the Fannie Mae and Freddie Mac debacle would not hurt investors, just happened.
Great…just great.
I’ve reported for about 18 months now the two GSEs, Fannie Mae and Freddie Mac are both severely over leveraged. Now I have a former Federal Reserve bank president agreeing with me calling both companies “insolvent”.
William Poole, said in a Bloomberg report,
Finally I am getting some support for my long standing prediction the GSE’s, Fannie Mae and Freddie Mac, are on the verge of collapse. Tuesday the New York Time publish an article which I believe is the first from a major news outlet to even raise the question of the GSE’s long term viability.
The article stated the worries by saying,
Freddie Mac, a company responsible (along with the other GSE, Fannie Mae) for the sound underwriting standards of conventional, prime mortgages, decided last week to tighten it’s underwriting. This Freddie Mac tightening of underwriting standards is probably too little, too late.
When President Bush signed the Economic Stimulus Act into law making jumbo mortgages GSE insurable, he may have unwittingly pushed our GSEs, Fannie Mae and Freddie Mac, already on tilt, over the edge. If you think we have a housing crisis now, wait until you see what the demise of the GSEs and subsequent secondary mortgage market would do!
Our Feed by Reader
Our Feed by Email
Our Feed by Mobile
