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99% Of New Us Residential Mortgage Approvals Are Going Direct To Govt Sponsored Entities

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http://us1.irabankratings.com/pub/IRAMain.asp

Chuck Gabriel at CapitalAlpha Partners notes that the Obama Administration is preparing to propose a gradual shrinkage of the housing GSEs to below 50% market share, a proposal that is "more prescriptive than expected regarding the Obama administration's goal of transitioning away from reliance on federally-backed mortgage financing." But one of the things we emphasize to our friends on all sides of the housing reform debate now shaping up in Washington is that we need to begin the dialog with a sober assessment of where the secondary market for selling and/or guaranteeing homes loans is today.

If you inspect the recent earnings disclosure from the largest US banks, what you find is that 99% or more of new residential loan originations are going into either FHA, Fannie Mae or Freddie Mac subsidized risk buckets. There is minimal private mortgage origination and private securitizations are non-existent, thus one wonders about the happy atmosphere at the Asset Securitization Forum Convention in Orlando. What's more, even though the overall mortgage loan market continues to shrink, the balance sheets of Fannie and Freddie are growing, especially loans held for the portfolio. In the case of Fannie, to over $400 billion at Q3 2010 vs. $250 billion at the end of 2009. The defaulted loans are held at cost, BTW.

Much of this increase in the size of Fannie's balance sheet is repurchased defaulted loans from securitization trusts, grim evidence of the generosity of Secretary Geithner in letting Bank of America ("BAC"/Q3 2010 Stress Rating: "C") off the hook for mere single digit billions in terms of loan repurchase liabilities. The taxpayer will have to pay the cost of this gift to BAC shareholders, with interest. But excluding this inflow of financial detrius, the balance sheets of the zombie GSEs would be shrinking on ebbing industry new loan origination volume. The run-off from existing RMBS portfolios is so brisk, we hear in the servicing channel, that a prolonged drop in new origination volumes could see the mortgage sector shrink dramatically in 2011 and 2012, this as loan repurchase volumes hopefully slow.

...........

But the more important point to make to the GSE refomistas in Congress is our favorite warning: Be careful what you wish for when it comes to "privatizing" the housing sector, especially now. Today the rump of the private label mortgage market is collapsing onto the GSE market, plain and simple. Speaking in Orlando at the ASF conference Monday, Rep. Scott Garrett (R-NJ), vowed to reduce the role of government in the mortgage sector. If you can imagine the guarantee fees for the GSEs doubling as apparently proposed under the Geithner and various GOP reform plans, this implies a shrinkage in the available supply of home credit that is truly horrendous. And you can kiss that 2012 housing market recovery goodbye as well.

If this is accurate the US mortgage market is the US govt (aka The Fed).

99% of mortgages are ending up in state sponsored entities!!!

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http://us1.irabankra...pub/IRAMain.asp

If this is accurate the US mortgage market is the US govt (aka The Fed).

99% of mortgages are ending up in state sponsored entities!!!

Rumours also that the Chinese are being advised to sell their stakes in the Fannie and Freddie.

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It had to move from the private players to the state. As technology makes more and more people obselete for employment it is getting riskier and riskier to make loans to individuals. The only way would be much higher interest rates charged to individuals to compensate for the risk. Which would cause a much larger fall than we've already seen in house prices.

The big banks already are getting out of the mortgage game in most industrial nations. The new game is all about big time corporate lending. While incomes of your average person are unstable and flimsly, a comany like Coca Cola you can lend billions to. If you look in detail at the big banks balance sheets, mortgages are a shrinking part of the total.

The other one banks are getting fed up with is consumer credit. Its a small and shrinking part of their books as well. I wouldn't be surprised to see the big banks practically get right out of consumer credit over the coming decades. Leave it to little fish at scam interest rates.

Otoh say its a big oil company looking at spending £5 billion pounds developing an oil field complex in Ghana. Then the banks are interested and the company has real collateral to back it up, and stability of income.

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The only time banks are sort of interested in mortgages is for BTL empires. Because it is the rents of the houses that pay for the mortgage. So it is the very capitalt he money is being borrowed for that allows the loan to be repaid.

Whereas with mortgages for your average person, they are having to go into the rest of the economy and come up with the money to meet the monthly payment. An increasingly challenging path, that more and more are failing to do.

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The only time banks are sort of interested in mortgages is for BTL empires. Because it is the rents of the houses that pay for the mortgage. So it is the very capitalt he money is being borrowed for that allows the loan to be repaid.

Whereas with mortgages for your average person, they are having to go into the rest of the economy and come up with the money to meet the monthly payment. An increasingly challenging path, that more and more are failing to do.

just remind the aa3 fan club....where exactly does the rent money come from?

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just remind the aa3 fan club....where exactly does the rent money come from?

The £35 billion the government spent last year to private landlords to house the unfortunate. :D Like 2% of the nation's GDP.

But even not factoring that in the BTL kingpins have enough equity that it shields the bank. Someone might be buying another £3 million pounds of real estate to rent out, but in they may already hold £10 million in equity.

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The £35 billion the government spent last year to private landlords to house the unfortunate. :D Like 2% of the nation's GDP.

But even not factoring that in the BTL kingpins have enough equity that it shields the bank. Someone might be buying another £3 million pounds of real estate to rent out, but in they may already hold £10 million in equity.

BTL Kingpins, LOL.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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