Freddie and Fannie

[TJ_98370]

..


Freddie Mac and Fannie Mae are seeking capital to fill their reserves. They had better strike it big if they hope to weather the credit crisis - investors are worried.....

.....Freddie accounted for a sharply higher batch of bad loans in its third quarter earnings, a little more than a week after Fannie did the same thing. But Freddie said that it would move quickly to raise more capital through a large issue of preferred shares. It added that it was seriously considering cutting its dividend - another capital preserving action. When asked on a conference call if Freddie would have to raise as much as $4 billion by issuing shares, Chief Financial Officer Buddy Piszel declined to quantify the issue's size....

.....Freddie stock tanked 29% Tuesday, and Fannie's was down 26%. Both have lost more than half their value since the end of September. The market is worried that that neither company has a strong enough financial footing to deal with further credit losses.....
..

-----------------------------------------



Deep earnings losses that slashed capital levels ensure Freddie Mac and Fannie Mae, the two largest U.S. home funding companies, will not be rescuing the ailing housing market any time soon.

These government-sponsored enterprises were expected to be, and posited themselves as, providers of stability to credit markets roiled by soured subprime loans that forced billions of dollars in write-offs at private mortgage companies and banks.

Instead, third-quarter losses at both GSEs are compelling them to dump bonds on the market rather than being net buyers, escalating the turbulence. The housing slump will drag on longer with Fannie Mae and Freddie Mac, the two largest U.S. mortgage asset purchasers, hamstrung, some strategists said.....

......Freddie Mac on Tuesday reported a $2 billion net loss for the third quarter as home prices sank, lenders made it harder for borrowers to get loans and foreclosures jumped......

......Last week, Fannie Mae reported its third-quarter net loss doubled from a year earlier to $1.52 billion......
.

[rose-colored-coolaid]

[TJ_98370]

And from our very own Seattle Times, we have more "doom and gloom" quotes. I think it's becoming rather obvious that we can forget about an increase in loan limits for awhile -


.
Mortgage-market woes just got a lot worse with the disclosure that the nation's second-largest buyer of home loans needs more capital or must retrench......

.....The mortgage market shuddered at Freddie's loss, coming just days after a $1.4 billion quarterly deficit was revealed by Fannie Mae, its bigger government-sponsored rival.
..
"It's going to make it increasingly difficult for Americans to borrow money to buy homes," said Peter Schiff, president of Euro Pacific Capital in Darien, Conn., who has long been bearish on the housing market. "This is not a subprime problem. This is a mortgage problem."....
.
...They (Fannie Mae and Freddie Mac) "have provided essential liquidity in a time of crisis," Howard Shapiro, a Fox-Pitt, Kelton analyst, wrote in a research note to investors Tuesday. The loss of their role to ensure the mortgage markets are liquid will result in "a further exacerbation of the housing downturn — even less credit available and steeper downturns in home prices."....
..
..

[AwaySooner]

Wow "retrench" is a bad bad word, the trenches are shit right now...Oh by the way, all you taxpayers, thanks for the "capital".

[rose-colored-coolaid]

Wohoo!

Lenders dropping like flies: CHECK.
$100 a barrel oil: CHECK.
Weakening Dollar: CHECK.
Rapidly increasing credit card debt: CHECK.
Declining retail sales: CHECK.
...
...
...
Fed Reserve dropping rates to 0.5%: Still waiting on Big Ben Bernake.

As an investor, I really can't see anything negative about this. It means lower interest rates, which always means increased growth. Right? Time to buy some GOOG.

[AwaySooner]

ABX.HE complete exploded today. Every single ABX.HE 2006 & 2007 series index hit new all time low prices (high implied yield) today.

Shit hits the fan and they are turning up the dial.

[TJ_98370]

.


Freddie Mac, the second-biggest source of money for U.S. home loans, plans to sell $6 billion in preferred stock and cut its dividend in half to shore up capital depleted by record mortgage defaults and foreclosures.....
.

[casey1167]

Please someone explain to me how you can pay out 8.25+++% dividends on preferred shares, if you are making your money managing LT mortgages at 7% interest.... I just don't get it. I know I am over simplifing it, but big picture it just does not work.

[rose-colored-coolaid]

[deejayoh]