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December 24, 2009, 10:27 AM EST
Fannie Mae and Freddie Mac have tapped $111.6 billion in aid from the government, as the Obama administration made them the centerpiece of its efforts to revive the housing markets.
In addition to the CEO pay, 10 additional executives at the two companies are eligible collectively for $30.1 million in compensation for this year.
WASHINGTON (CNN) -- Pledging to take "the air out of golden parachutes," President Obama announced Wednesday that executives of companies receiving federal bailout money will have their pay capped at $500,000 under a revised financial compensation plan.
So the $500k cap only applies to private businesses that get government bailouts, not government/private clusters like Fannie/Freddie? They should be in jail, rather than being rewarded. It's long past time that government support and backing of these two companies was ended.
If I'm reading this article correctly the 6mil. pay figure is a done deal. While those of us in the middle class who support both the poor and the rich struggle to live paycheck to paycheck the executives at two of the firms largely responsible for the current recession walk away with a cool 6mil each??? If it were not for the Baileys in my coffee my head would be exploding right now.. This is absolute madness and sickening. Are they purposely trying to incite some type of violent revolution????
By the way, if you're wondering what sort of trash Fannie and Freddie are holding, here's what Mark says about their "underwriting quality" during the boom years:
Many lenders, especially the big banks, had in-house DU and LP underwriting ‘trainers’ that would go around to the various mortgage branches and teach underwriters how to ‘trip’ the systems in order to achieve automated loan approvals when a declination was certain, or simply get fewer approval conditions on a loan that was borderline. Getting a loan approval out of DU/LP on a borrower with a 100% DTI — with limited documentation required on the automated findings — was not uncommon. Got that? A DTI - that is, debt-to-income - of one hundred percent - was quite possible, along with limited documentation as well!
Now let's remember that most people turn over their home about every seven years (that's the average "holding time"), so an awful lot of Fannie and Freddie's paper - quite possibly as much as half - is contaminated.
Still feeling good about a housing recovery?
If you're wondering how bad this is in the so-called "prime" loans the Mortgage Bankers Association lays it all out:
6.84% of prime loans are now delinquent (at least one payment behind but NOT in foreclosure) and 3.20% are in foreclosure. This means that almost 1 in 10 PRIME LOANS are either late or in foreclosure.
FHA loans are running close to 20% between delinquent and foreclosure-in-process. That's ONE IN FIVE.
And of subprime loans, 41% are either delinquent or in foreclosure. FORTY ONE PERCENT!
A mortgage that is at least two payments late almost never "cures" - that is, once you miss a second payment you're virtually assured to eventually be foreclosed. (Some one-payment misses are legitimate errors or very temporary cash-flow disruptions.)
Here's more change - Fannie and Freddie have just had their funding limits removed.
TREASURY ISSUES UPDATE ON STATUS OF SUPPORT FOR HOUSING PROGRAMS (http://www.ustreas.gov/press/releases/2009122415345924543.htm - broken link)
At the time the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship in September 2008, Treasury established Preferred Stock Purchase Agreements (PSPAs) to ensure that each firm maintained a positive net worth. Treasury is now amending the PSPAs to allow the cap on Treasury's funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years. At the conclusion of the three year period, the remaining commitment will then be fully available to be drawn per the terms of the agreements.
So now the American taxpayers are now exposed to more losses from this failure of an enterprise.
Three years - why that's right after the 2012 elections. I wonder what the angle is that we are missing?
Is it me - or are these lenders, whether it's Fannie, Freddie or the banks, making money in the stock market rather than through interest money from lenders? Less people are able to make mortgage payments these days - so they must be losing money there. More people will be losing jobs next year if we continue Obamanomics - so future mortgage payments are not looking good.
But through bailouts, TARP, whatever - we subsidize the lenders, who put the money in the market, and the market goes up. That makes Obama look good - but the market gains are not true. Now at the end of the year, the banks are paying the TARP money back - freeing themselves from government controls - and therefore able to payout year end bonuses. By the way - Citigroup was allowed to keep $38 million in taxes from dividends on its stocks.
Now here is what to watch for early next year. If these year end TARP payments by the banks were solely for the purpose of paying out bonuses, I would expect another TARP to give the money back to the banks to put in the market.
With great fanfare early in the year, the Obama administration unrolled a plan to spur banks to help troubled homeowners avert foreclosure by reducing their monthly payments.
...
The net results have been paltry: Just 31,382 borrowers nationwide had received permanent loan mods as of Nov. 30 under the Home Affordable Modification Program (HAMP), the Treasury Department reported. Meanwhile, First American CoreLogic says that 1.7 million homes are likely to be lost to foreclosure next year.
"HAMP is turning out to be something of a disaster," said Lisa Sitkin, an attorney at Housing & Economic Rights Advocates in Oakland, who works with many struggling borrowers. "There are delays and lost steps at every turn. The bureaucratic requirements are endlessly frustrating."
In the article is an account of a family who has been continuously seeking help from Chase bank. They have spent their 401K and savings. Pretty scary that this is becoming more common.
What struck me is the loss of control over their own lives. Instead of having a job and paying their mortgage, they now have to depend and wait on people who really don't care. For these bank employees who simply deal in accounts and numbers, this family is just an account number - and it's no big deal to give the family the run around. Meanwhile, the family is drowning in debt.
Solutions to this are slim - either they pull themselves up by their own bootstraps, or the taxpayers subsidize them, or they sell the house - but then they have to live somewhere, and they still will have to pay somehow. For now, there is a mortgage agreement that needs to be paid.
How much can taxpayers subsidize the mortgages of others?
99% of the people can not buy a home outright. So a mortgage is necessary - either 15 or 30 years - which is a long time to guarantee employment. What is the safest way to ensure living arrangements and not put ourselves at risk to losing our homes if something happens? Or is that even possible?
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