Entries Tagged as 'Housing'

Fannie Mae and Freddie Mac

Thus far the collapse of the US housing market and [near] failure of Frannie Mae and Freddie Mac have cost US tax payers $145B… and it’s far from over.

The New York Stock Exchange have announced that the two companies will be delisted from the exchange next month (the stocks had been trading at the $1 per share mark — the minimum threshold to remain on the exchange — for over two years (since before the federal government took control of the companies).

The Federal Housing Finance Agency states that the delisting “does not constitute any reflection on either [company’s] current performance or future direction.”

Right…

Fannie and Freddie were created by an act of Congress decades ago… as private companies.  They buy mortgages from banks, re-sell them to investors, and guarantee to pay off the loans if borrowers default.

And, of course, for the last decade they’ve been buying junk mortgages that banks irresponsibly made to people who couldn’t possible afford them on vastly over-valued property.

Of course, the bank’s weren’t the losers; the shareholders of Fannie Mae and Freddie Mac largely lost their proverbial shirts — but the tax payers bailed out the banks (and continue to fund Fannie and Freddie — and they continue to lose money).

Congress will have to decide how to handle this mess.  A GAO report last fall included these points.

  1. Create a government agency to buy mortgages and re-sell them to investors. This would eliminate the profit motive that, some critics say, drove Fannie and Freddie to take the risks that led to their demise. It would also continue to subsidize the mortgage market, making it easier for Americans to buy homes. On the other hand, the government would still be putting lots of taxpayer money at risk to subsidize the housing market.
  2. Reconstitute Fannie and Freddie as government-sponsored enterprises, similar to the way they were before. This might be accompanied by new rules limiting the risks the companies can take. Still, this would bring back the problematic ambiguities of having private, government-sponsored companies.
  3. Dramatically reduce the government’s role in the mortgage business. In this model, there would essentially be no replacement for Fannie and Freddie. But the government might still take some role, such as selling insurance to cover mortgage default. This would reduce (but not eliminate) the risk to taxpayers, but it might also make it more difficult for people to get mortgages.

Originally posted 2010-06-18 02:00:20.

Sold: Amityville Horror House

by Sarah Mcbride

Trying to sell a house in today’s lackluster real-estate market?

Maybe you just need a good story behind the property. That may have helped homeowner Brian Wilson, who just sold his place at 108 Ocean Ave. in Amityville, NY. The house inspired the bestselling book and movie “The Amityville Horror” after the 1974 murders that took place there.

The five bedroom Dutch-colonial style dwelling was listed in May for $1.15 million. It sold for an undisclosed price, the New York Daily News reported.

After the murders of the DeFeo family, the property sold to George and Kathleen Lutz, who said the house was haunted and moved out shortly after buying it. Their experiences provided the basis for a bestselling book and movie.

A bank foreclosed on the house, and it was sold in 1977 to James Cromarty, who lived there ten years and told Newsday in May that “nothing weird ever happened there.” He sold it to another couple that also lived there ten years. It last sold in 1997 for $310,000.

The murderer, family member Robert DeFeo Jr., is still incarcerated.

Amityville Horror House

The house in 1974
Richard Drew/AP

Original Story on NPR.org

Originally posted 2010-08-20 02:00:19.

:( Banks might not have gotten a Get Out Of Jail Free Card afterall :)

It looks like the first major salvo has been fired in potentially forcing the banks to accept liability in the Residential Mortgage Backed Securities (RMBS) fiasco that cause devastating harm to the US economy recently.

The New York Fed, BlackRock, and Pacific Investment Management Company sent letters to Bank of America alleging that its subsidiary, Countrywide, failed to perperly service loans totaling $47 billion.

While the letter itself doesn’t constitute any litigation, it does lay the groundwork for investors filing to recover investments that may have been negligently (mis)handled by banks.

This is a direct result of the “robo-signing” mess that banks have gotten themselves into; since it would be fairly easily established that the banks did not perform due diligence on loans where the documents were not properly reviewed.

I suspect this time it won’t be quite as easy for the banks to pull a rabbit out of the hat by getting the Federal government to provide them with loans — but then again, if you and I don’t make it clear to our elected officials that we’re not interested in another loan to banks, that we expect them to resolve it just like regular Americans have during this economic crisis that banks are largely responsible for.

Originally posted 2010-10-26 02:00:55.