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Trouble At Us Mortgage Provider Fannie Mae

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Holy Sh!t

This is the type of event than could trigger a massive sell-off in the Dollar.

Suddenly owning US debt won't look so clever.

The next few years are going to go down in history for some monumental economic events.

Edited by BandWagon

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Guest muttley

I wouldn't read too much into this.The share price is falling because of financial irregularities,it's not going to take the Stock Market or the housing market with it.

shares tumbled following the story, which said investigators discovered evidence executives overvalued assets, underreported credit losses, and misused tax credits.

From a mortgage provider! Whatever next?

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it's not going to take the ...housing market with it.

I wouldn't be so sure....

http://www.larouchepub.com/other/2002/2924fannie_mae.html

Since 1995, Fannie and Freddie, et al., accounted for almost three-quarters of all housing mortgages.

If they go under they're going to take a large proportion of the highly-leveraged US public with them, and no, Fannie and Freddie do NOT have government guarantees should the worst happen; they are private corporations.

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Yeah, just is a little rampant corruption at our biggest mortgage provider.

BTW, they loan money to anyone who breaths, on inflated properties, then package up those loans and sell them on the secondary market at near government bond rates. Did I mention they are the largest provider of mortgages in the US?

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BTW, they loan money to anyone who breaths, on inflated properties, then package up those loans and sell them on the secondary market at near government bond rates. Did I mention they are the largest provider of mortgages in the US?

Scary

This business model sounds a little like Northern Rock, the biggest UK supplier of mortgage backed securities.

Anyone want to hazard a guess at what happens to the value of that debt when homeowners start defaulting on their loans?

Edited by BandWagon

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Critics, including Alan Greenspan, say that this is only allowed because investors seem to think that there is a hidden, or implied, guarantee to the bonds that Fannie Mae sells ([1]). Although the company describes them as having no guarantee, nevertheless the vast majority of investors believe that the Government would prevent them from defaulting on their debt, and so buy bonds that are very low interest rates compared to the risk.

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As some of you know I had decided to stop posting after being accused of ramping gold. But this is such an exceptionally bad sign that I feel compelled to come back to warn you all. Fannie Mae's share price crash is a major indicator of impending trouble in the financial markets. See this old article (January 2005) for an excellent explanation:

http://www.gold-eagle.com/editorials_05/willie011105.html

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As some of you know I had decided to stop posting after being accused of ramping gold. But this is such an exceptionally bad sign that I feel compelled to come back to warn you all. Fannie Mae's share price crash is a major indicator of impending trouble in the financial markets. See this old article (January 2005) for an excellent explanation:

http://www.gold-eagle.com/editorials_05/willie011105.html

Come on now cgnao to stop posting because of a few people calling you a gold ramper, f*ck um, if they dont want to read your posts they should shut there eyes, ill say it again ... f*ck um. Just one more time to make sure i get my message across ... f*ck um.

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A lot of people have been warning about this for years now. It's all coming true just like the problems they warned about at Ford, General Motors etc.

This could easily be the trigger for the US housing markets.

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Guest muttley
Come on now cgnao to stop posting because of a few people calling you a gold ramper, f*ck um, if they dont want to read your posts they should shut there eyes, ill say it again ... f*ck um. Just one more time to make sure i get my message across ... f*ck um.

So gold rampers should be given a free run?What about house price rampers,are we to ignore them too?

Are goldbugs really so precious that they should be absolved from criticism?

If they believe that then f*ck um.

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A lot of people have been warning about this for years now. It's all coming true just like the problems they warned about at Ford, General Motors etc.

This could easily be the trigger for the US housing markets.

Homebuilder stocks have been on a tear for the last few years here. They have pulled back quite a bit lately where down today. There is plenty of fluff built into the housing market.

But realistically, the system is so rigged that anything will be done to postpone a fall. In the meantime, our country goes deeper in debt and the housing bubble continues.

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I have no doubt FNM is the new Enron.

But FNM, FMC and friends are creating $ 600 billion worth of demand in the US economy annually through the housing pyramid.

The same game ( mortgage debt securitization ) is on in Europe, too.

"The world as we now it must come to an end." - Stephen Roach

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FNM Stock Price

Fannie Mae's (the US's biggest mortgage provider) stock fell over 10% today on rumors of more accounting scandals. It is a new 52 week low and around a 5 billion $ loss in market value. It would probably be bankrupt without government support.

we all know what happened the last time US capitalism was rocked by accounting scandals in summer of 2002.

they rigged a war with IRAQ to solve the crisis , boost the economy and deflect public attention frmo the failures and frauds such as Enron and TYCO being revealed.

sadly the US response to any crisis in capitalism will be exactly the same with IRAN the likely target.

Edited by sammac1967

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Guest Riser

Before posting a link last week discussing the impact of a credit derivatives event I thought Fannie Mae were a type of american muffin, it is much more scary than that :ph34r:

"Fannie Mae is not too big to fail" Alan Greenspan

Are We Headed for a "Credit Derivatives Event"?

If it takes 1,500 consultants a year to straighten out Fannie Mae's hedge book, how long would a complete audit of JPM's book take?

** If all JPM's trades had to be unwound tomorrow, would JPM even be solvent?

One thing we do know is the derivatives bubble has become too large for transparency of any kind. No one fully understands exactly what the counterpart risk really is. Everybody has vast positions, most of which are "netted out," but it's also a chain that no one has complete control over or even knowledge about. What if the ultimate guarantor of a slew of contracts is Madame Merriweather's Mud Hut in Indonesia? How would anyone know? After all, Fannie Mae doesn't even know what it itself has on its own books. How could anyone else possibly know? That, of course, begs the question: Is Fannie Mae "too big to fail" or "too big to bail"?

Let's now return to the original question: Are we headed for a "credit derivatives event"?

I do not see how we can possibly avoid one, but timing it is the problem, since no one knows what event might trigger the cascade

'Fannie and Freddie Were Lenders': U.S. Real Estate Bubble Nears Its End

The U.S. financial system is now dependent to an unprecedented degree upon one prop: the greatest housing-real estate bubble in human history. A hyperinflationary spiral has sent home prices shooting up by 10-40% annually in recent years......................

There is a physical constraint on their ability to pay, and thus, ultimately, a constraint on the housing bubble itself: These families are one or two missed paychecks, or the loss of a job, away from defaulting on a mortgage. Default rates on mortgages insured by the Federal Housing Administration—used primarily by families of middle or modest income—have recently reached 10% in some urban areas of the United States. As a wave of cumulative mortgage defaults spreads, the housing market will implode, wiping out trillions of dollars in housing values................

Fannie Mae's three risky obligations total over $2 trillion, vigorously used to inflate the housing bubble. Now, an increased default level among the $5.757 trillion in home mortgages, which by itself were not enough to bring down the whole housing market, would create a radioactive reaction inside Fannie Mae, causing it to bring down that market by defaulting on hundreds of billions of obligations.

While Fannie Mae was building up its risky obligations, so was its crony Freddie Mac. Freddie Mac's total of these three risky obligations is $2.91 trillion. (The smaller Freddie Mac's total is bigger than Fannie Mae's, because it has a much bigger derivatives portfolio.) Other institutions which perform functions similar to Fannie Mae, such as the Federal Home Loan Bank Board and private issuers of MBS, have approximately another $0.7 trillion in risky obligations. Thus, the total of housing-related high-risk obligations is roughly $5 trillion.

It should be kept in mind that if one starts with $5.757 trillion in mortgages, these $5.0 trillion in risky obligations are distinct from and in addition to the mortgages, and a total of $10.757 trillion is laden onto the homes and attached to the incomes of America's homeowners. A Mortgage-Backed Security is an instrument with its own risks, independent of those of the underlying mortgages. For example, a dramatic change in interest rates or even a significant increase in pre-payments of mortgages can wipe out MBS value, quite as efficiently as the increase in mortgage defaults. In the case of the REMIC portion of MBS, this risk is considerable. Fannie Mae's financial paper is a ticking time-bomb threatening to bring the whole leveraged operation down.............

Edited by Riser

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  • 302 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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