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Old 07-30-2008, 07:46 AM
 
Location: Spring Hill, Florida
58 posts, read 183,224 times
Reputation: 18

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Now that Bear-Stearns & Countrywide have crashed and Fannie Mae has had to be bailed out by the Fed what are these sub-prime pools of mortgages worth? And, if a sub-prime lender is holding too many that are not liquid enough to return them any money how can they originate any new loans? or stay in business? The Fed-funds rate is currently at 2%; why don't they use that money --- if they can get it --- instead of continuing to rely on their potentially worthless MBS --- at least THOSE loans would be good loans?

Keith G.
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Old 07-30-2008, 08:28 AM
 
Location: Orlando FL
1,065 posts, read 3,674,246 times
Reputation: 424
No their not all worthless, they are worth whatever the house may be worth after a foreclosure process and sell them. So maybe 30-50% of original value? If it's a second lien, I'd say they are worthless.

As far as how to sub-prime lenders originate new loans...they don't, that's why 99% of them are out of business now.
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Old 07-30-2008, 11:59 AM
 
Location: Spring Hill, Florida
58 posts, read 183,224 times
Reputation: 18
Greg,

That's the trouble, there's still way too many in business; I'm a realtor and mortgage broker and the lenders are stringing everything out-one that's been given 4 extensions for no apparent reason --- says that they need more docs---stipulations. By the way --- does anybody know if there is a site anywhere on the Web where I can check the financial health of a lender? After Bear-Stearns and Countrywide and Fannie-Mae being bailed, I don't trust any of these guys.

Any help is appreciated.

Keith G.
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Old 07-31-2008, 08:17 AM
 
Location: Orlando FL
1,065 posts, read 3,674,246 times
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I've heard people check out this site The Mortgage Lender Implode-O-Meter - tracking the housing finance breakdown, related to Alt-A and subprime mortgages, lending fraud, predatory lending, housing bubble, mortgage banking, foreclosures, debt, consolidation, lawyers, class-action lawsui , but I haven't myself. I"d stick with the big named banks, like Wells Fargo, Chase, maybe BOA, though most have pulled their wholesale business, and BOA I don't trust only because they bought CW, which was one of the worst out there IMO.

I too have my Mortgage broker license, though have not used it in years (probably expired now that I think about it), and I don't reccomend many of my clients go through them either only because far to often the lenders they work with do just what you say is happening. I just recently had an old MB I knew do a loan for a Foreign Nat'l because the big bank I usually send my clients to didn't do that type of program anymore. She had 3 banks she could use, and one by one they all fell out saying they don't do that type of loan anymore.

I'd still trust Fannie-Mae, they are the backbone to the entire mortgage industry, they won't be allowed to fail. In fact unless someone qualifies for a conventional loan or FHA/VA there's a good chance they won't qualify for anything.
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Old 07-31-2008, 10:11 AM
 
Location: Olympus Mons, Mars
5,000 posts, read 8,045,656 times
Reputation: 4931
most of them sold from 2004 onwards are pretty much worthless! here in Southern California about 80% were subprime and Alt-A and transacted with highly suspect documentation and very high LTVs.
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Old 07-31-2008, 07:48 PM
 
Location: Spring Hill, Florida
58 posts, read 183,224 times
Reputation: 18
Default MBS-worthless

Greg,
I checked there thanks, got some good input. The trouble is Freddie & Fannie dealt in such quantity that when they crashed they hit hard. When you put 1000 30-year @6% loans in a pool and sell them to investors when they become worth 0, that bond you sold is also worth 0 and the investors are screaming and, even though they are NOT backed by the government, they had to be bailed out by the fed, as they were? Why? Because the whole Capitalist system---with ripples throughout the entire (civilized) world--- would have collapsed; don't believe that? Who do you think OWNS Fannie and Freddie? Asia, china, holds 985 billion of Freddie & Fannie paper. Not to mention the fact that the already weak dollar would become toilet paper. As it is the dollars fading fast & we can barely finance the trade & fed budget deficit. Funny, I was living in Sacramento in 1979-83 and saw the same exact thing---just not as BIG. If you ever see another real estate spending boom like this and hear everybody saying "oh this time it's different" forget about it ... it's never different. And it's still going ... these mortgage-backed securities, who ever started it? It had to have been the Lenders themselves, they got to make up nifty names like par and yield spread and then make all that money and all because of Greed, everything happened off of greed and then the MBS pools---an accident looking to happen. The fed is giving out 2% money to the lenders, so why don't they take as much as they can and start making solid loans and clean up their subprime and ALT A related write-downs. Only because everybody involved is doing exactly what they have always done---looking out for #1 and getting as much money, for themselves, as they can. Anybody who thinks the Angelo Mozillos of this world weren't complicit and in on it are delusional.

Peace,
Keith G.
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Old 08-01-2008, 01:44 PM
 
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,958 posts, read 18,551,064 times
Reputation: 6356
My mother invested in a GNMA mortgage backed security a while back. It was and continues to have been a very good investment for her. Of course the GNMA certs are full faith and credit instruments.
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Old 08-01-2008, 06:20 PM
 
Location: Spring Hill, Florida
58 posts, read 183,224 times
Reputation: 18
DiMenscha,

Contrary to what most people think Freddie & Fannie are NOT federally-insured. FDR, probably 60 plus years ago originated them and DID back them up but they went private in 1968. Ginnie-Mae however, is and always has been backed by the U.S Govt.; usually connected to VA and FHA mortgages.

Keith G
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Old 08-01-2008, 07:05 PM
 
Location: Cary, NC
1,036 posts, read 3,629,409 times
Reputation: 503
Quote:
Originally Posted by Keith G View Post
DiMenscha,

Contrary to what most people think Freddie & Fannie are NOT federally-insured.
Ginnie-Mae however, is and always has been backed by the U.S Govt.; usually connected to VA and FHA mortgages.

Keith G

Yep, FHA and VA loans are "insured/guaranteed" by the government. They have to sell the home if its foreclosed (through HUD or VA), not the bank REO department.

Fannie Mae and Freddie Mac are government supervised but privately owned. The government oversees and regulates some of their operations but they are for all purposes private, for-profit companies. The mortgages have private mortgage insurance and there is 0 government backing of the bonds (for now, we will see if that changes).

The other options were "portfolio" and "sub-prime" programs that did not go through any of these. Banks set the rules/terms and as long as they did not violate federal regulations the banks could set the risk/pricing they felt was adequate. Most of the major problems are in these loans that had far looser underwriting standards, with higher rates to make up for the risk. "Prime" and government loans are also having problems, but not (yet) to the extent of the others.
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