patrick.net

Now WF is recapitalized and can lend that money again to another sucker.

Your're better off with Freddie anyway. If there is a lending program out there (or will be proposed), it will be eligible to fannie/freddie held loans first.

WFB sold the loan, the question is how much premium/discount. Freddie may benefit from the expected profit if you do not default and WFB frees up capital for other purpose/strategy/needs. Perhaps, some customers trading their WFB account to a credit union recently so they need to adjust as well.

You got a federally subsidized mortgage. It meet the criteria for Fannie and Freddie, and it can be bought and sold by them.

that's a normal practice. a lot of loans get sold to FN/FR. banks do not want to tie up their money up for 30 years in mortgages.

Bap33 says

Does Freddy just go around buying loans from banks? Educate me folks

Liquidity... they sold their Note Receivable (your loan) for cash.

The three parties directly involved are: the one who sells the receivable, the debtor (the account debtor, or customer of the seller), and the factor.

http://en.wikipedia.org/wiki/Factoring_(finance)

corntrollio says

You got a federally subsidized mortgage. It meet the criteria for Fannie and Freddie, and it can be bought and sold by them.

The note that was sold was a regular, conventional loan. One that I used to pay off the FHA - 203k loan that I used to re-hab this house back to a livable condition. If a person is not wealthy, the only way (or, I should say, best way I know of) to buy a home that needs major repairs is with the FHA 203k. ANd the next smart thing to do is refi out from the PMI and get a regular note 6 months later -- that's what I did.

Thanks folks. Thanks thomas.wong.

I guess my issue is, the tax payer supported money supplier is buying debt from a for-profit money supplier, and that means the for-profit guys are not gambling for their profit, they are secure in their gamble on the tax-payers dime. Just seems a bit not-right.

Bap33 says

The note that was sold was a regular, conventional loan. One that I used to pay off the FHA - 203k loan that I used to re-hab this house back to a livable condition.

Your "regular, conventional" loan was still federally subsidized. It benefited from the GSE's implicit guarantee.

Your FHA loan was a huge handout.

Bap33 says

I guess my issue is, the tax payer supported money supplier is buying debt from a for-profit money supplier, and that means the for-profit guys are not gambling for their profit, they are secure in their gamble on the tax-payers dime. Just seems a bit not-right.

What seems not-right is that you talk the talk, but don't walk the walk. You benefited from that taxpayer-supported regime, heavily. Makes you seem like a cheap hack vis-a-vis your rantings here, although that's not surprising based on other things people mentioned in another thread.

corntrollio says

Your "regular, conventional" loan was still federally subsidized. It benefited from the GSE guarantee.

You do realize we are talking about a loan created in June 2011, right?
You know what corn, don't bother answering, thanks.
Your hate has blinded you ... sad, really.
Good day.

Bap33 says

You do realize we are talking about a loan created in June 2011, right?

Yes, which only makes it more likely to be government-subsidized (like the FHA loan, obviously). A huge percentage of the residential mortgage market is government-subsidized right now. Why do you think yours isn't?

No hate, just pointing out facts as usual.

Did you think the government only subsidized loans during the boom? If so, you'd be wrong because government-subsidized loans dropped during the boom, while private bank lending went way up. Furthermore, the government has been subsidizing loans for many years and most people didn't even know until recently unless they learned about real estate finance.

Zlxr says

But please explain why Wells Fargo always seems to be the one to buy the mortgage from the originating bank.
They always bought my loans - but then apparently they sell them off to Freddie without telling us - then they service the loan.

Well, FHA-subsidized Bap didn't say who Bank X was, but it's entirely possible that Wells Fargo is the one doing the repackaging loans in some other way.

Then Freddie can buy the loans and securitize them. Wells Fargo can also make good money servicing the loan.

profit? it may have sold it for more than it is worth. Freddy is taxpayer funded and does not care much about price, its sole mission now is to prop up RE market prices.

Wells seem to continue make some money from it by servicing loan, it is much safer profit center vs. keeping 4-5% mortgage while monetry base is expanding rapidly due to Fed policy which devaluates the currency.

Bank X was used for my personal info protection. It is a west coast based lender, that my broker uses. They sold to WellsFargo .. and that made sense, since a local lender would just sell their long-term paper for short term profit. My paper would look good in that way.

But, for a tax-payer supported loan gaurenteer to be a profit function for Wells seems a bit odd to me. Freddy has paid a short term profit to Wells, in exchange for being exposed for a longer time with the hope of some long term profit .... but, unless I missed something, Freddy does not operate "for profit", really, and has just helped a for-profit bank turn a profit on the short term.

At any rate, I shared this becasue I know there are money people that know the maket, the rules, and the reason. I was hoping to hear from them.

So far, I have not made the connection that corn keeps hammering away onm, where my plain old conforming loan, made between me and some lender on their terms, was subsidized by tax-payers.(?) Not seeing it myself. If my loan was taxpayer supported, then that would mean ALL mortgages are, and that would need some explaination for me to understand.

Bap33 says

So far, I have not made the connection that corn keeps hammering away onm, where my plain old conforming loan, made between me and some lender on their terms, was subsidized by tax-payers.

If Freddie or Fannie could buy it, it must meet Freddie and Fannie's rules, and is therefore government subsidized. Loans that do not meet Freddie and Fannie's rules (including many private non-agency loans made by banks during the boom) cannot be bought by them and aren't subsidized. It's that simple.

lexa says

profit? it may have sold it for more than it is worth. Freddy is taxpayer funded and does not care much about price, its sole mission now is to prop up RE market prices.

This is nonsense. Freddie and Fannie exist to make a profit. The loans they are currently buying will almost certainly turn a profit. Some of the loans from during the boom are the ones causing losses.

Bap33 says

But, for a tax-payer supported loan gaurenteer to be a profit function for Wells seems a bit odd to me. Freddy has paid a short term profit to Wells, in exchange for being exposed for a longer time with the hope of some long term profit .... but, unless I missed something, Freddy does not operate "for profit", really, and has just helped a for-profit bank turn a profit on the short term.

I explained this above. Wells Fargo probably repackaged it and sold it to Fannie/Freddie for securitization. Wells Fargo will make money on the servicing and on whatever other factors it bought the loan on. It likely made little-to-no money on the actual loan itself, although it could have made money buying/selling it.

It sounds like some of you people don't understand the secondary mortgage market. You should read about it. You guys also don't understand the role of Freddie and Fannie, and don't really understand real estate finance.

corntrollio says

This is nonsense. Freddie and Fannie exist to make a profit. The loans they are currently buying will almost certainly turn a profit. Some of the loans from during the boom are the ones causing losses.

nonsense is yours.

Freddie and Fannie exists at pleasure of a White House who represents US taxpayers. WH declared many times publicly that its goal was to prop up RE prices (AKA "RE recovery")

Recent Freddie and Fannie's underwater re-fi program is no exception. Freddie and Fannie are likely to lose money on it as many of those underwater loans would still default or shortsale while in interim they'll be getting less interest on them after re-fi.

The sole goal of this recent re-fi program is to kick the can down the road, by delaying foreclosures and short-sales and proping up RE prices longer.

corntrollio says

If Freddie or Fannie could buy it, it must meet Freddie and Fannie's rules, and is therefore government subsidized.

um, no, that does no equate to susidization. Glad we got that cleared up.

Bap33 says

So far, I have not made the connection that corn keeps hammering away onm, where my plain old conforming loan, made between me and some lender on their terms, was subsidized by tax-payers.(?) Not seeing it myself. If my loan was taxpayer supported, then that would mean ALL mortgages are, and that would need some explaination for me to understand.

corntrollio says

It sounds like some of you people don't understand the secondary mortgage market. You should read about it. You guys also don't understand the role of Freddie and Fannie, and don't really understand real estate finance.

umm, yea .. like no shit, that's why I made this post.

a href="/post/1147642#comment-777096">corntrollio says

Freddie and Fannie exist to make a profit.

If that is the case, then Barney Frank and his boyfriend Franklin, have some explaining to do.

Bap33 says

um, no, that does no equate to susidization. Glad we got that cleared up.

Yes, it does. You don't understand real estate finance and the secondary market if you think this. Why don't you read about it somewhere instead of asking unintelligent questions here when someone is trying to explain things to you?

Fannie and Freddie enable other lenders to provide lower rates to mortgagors. If they did not exist, you would pay a higher rate on your mortgage. This is a subsidy.

They were created by the federal government to lower people's lending costs and have what is considered an implicit guarantee by the federal government, even though they are corporations. That means people take on less risk when they buy a Freddie/Fannie bond, and mortgagors pay lower interest rates as a result.

Not all loans are government-subsidized. A loan that cannot be bought by Fannie or Freddie (such as an Alt-A loan made by a private bank during the boom) is not subsidized, nor is a non-conforming jumbo loan or any other non-conforming loan.

Conforming means that the loan meets the requirements of Fannie and Freddie to be bought by them and securitized by them. However, Fannie and Freddie may also buy bonds themselves, I believe, in some cases.

lexa says

Freddie and Fannie exists at pleasure of a White House who represents US taxpayers.

No, they don't. They have a charter and have a mission statement. Just because they are partially owned by taxpayers right now does not mean all that changed.

In order to be eligible for the re-fi program, the loan must already be owned by Freddie/Fannie, i.e. for purposes of making a profit.

corntrollio says

No, they don't. They have a charter and have a mission statement. Just because they are partially owned by taxpayers right now does not mean all that changed.

yes, they're. No charter would prevent them from going bankrupt, taxpayers keep them alive and WH controls it with a Presidential decree (as is the case with underwater re-fi). Thus, those GSE, despite of their charters serves at pleasure of WH, should they fail to do so, WH would cuts their financing (via their party in Congress) which would be end of them.

In order to be eligible for the re-fi program, the loan must already be owned by Freddie/Fannie, i.e. for purposes of making a profit.

i know.. why did you even brought it up? how does it change the fact that they're likely to lose money on this underwater re-fi program?

lexa says

i know.. why did you even brought it up? how does it change the fact that they're likely to lose money on this underwater re-fi program?

Without a re-fi, a larger number of loans would default. If the point is to securitize loans and sell off the bonds, I don't see how they'd make a ton less money through this program.

corntrollio says

Without a re-fi, a larger number of loans would default.

but with re-fi GSE make less in interest (so sell loans/securitized packages for less).

lexa says

but with re-fi GSE make less in interest (so sell loans/securitized packages for less).

It depends. If it already sold the securities, it will make more money from underwriting new ones as the old ones are paid back in full. If it's holding the loans itself, they will make slightly less on performing loans and the loans that were likely to fail may not. The securities that it does sell will be more likely to perform than the existing ones.

corntrollio says

Fannie and Freddie enable other lenders to provide lower rates to mortgagors. If they did not exist, you would pay a higher rate on your mortgage. This is a subsidy.

please explain the function by which F and F make money cheaper to lend for regular lenders. Thanks.

p.s., a wise person once said there was no such thing as a dumb question:
corntrollio says

Why don't you read about it somewhere instead of asking unintelligent questions here when someone is trying to explain things to you?

Bap33 says

p.s., a wise person once said there was no such thing as a dumb question

Yeah, well they weren't very wise then. You know those people who sat in the back of class and asked stupid questions that had either already been explained had you done the reading or the teacher/professor already explained it in the lecture? Yeah, dumb questions.

Bap33 says

please explain the function by which F and F make money cheaper to lend for regular lenders. Thanks.

I'd recommend reading Wikipedia or other basic resources on this, e.g.:

http://en.wikipedia.org/wiki/Fannie_Mae#Business

For FNMA/FHLMC-eligible mortgages, the existence of Fannie and Freddie is a subsidy because those markets are more liquid and more efficient and generally have lower risk, so mortgagors get lower rates. Without them, the loans that are conforming or superconforming now would have higher rates.

This is really a basic question of how the GSEs function and what they do.

Bap33 says

please explain the function by which F and F make money cheaper to lend for regular lenders. Thanks.

F and F force money to become cheaper by offering mortages (underwriting, insuring) services at lower rates vs. competition.

when F & F takes losses they ask Uncle Sam to cover it and while leave (uninsured by them) private mortgage investors to take their losses.

thus, they facilitate wealth transfer from private investors to homeowners.

corntrollio says

It depends.

that's right,

there is a potential for a loss that other lenders are reluctant to take (right, 'cause they are just stupid, F&F are the smartest of the bunch that's why they got onto subprime game so late).

then why F&F are doing what other lenders would not? Not 'cause they serve the WH and the latter instructs them to risk losses to subsidies homeowners and prop up RE prices?

lexa says

when F & F takes losses they ask Uncle Sam to cover it and while leave (uninsured by them) private mortgage investors to take their losses.
thus, they facilitate wealth transfer from private investors to homeowners.

Oversimplification that's not really true.

Fannie and Freddie worked fine for many years before the current financial crisis caused by wacky private lending. They don't ordinarily take massive losses like this. And last I checked, TBTF banksters got bailed out by the federal government too, so trying to hold them to a different standard is silly.

lexa says

then why F&F are doing what other lenders would not? Not 'cause they serve the WH and the latter instructs them to risk losses to subsidies homeowners and prop up RE prices?

Someone has to compensate those lenders. If Congress does not authorize it, the federal government cannot pay those lenders to do this. Fannie and Freddie do not serve the White House, but they are under conservatorship of FHFA, so they can be directed to do certain things. The government happens to be the majority shareholder, so like it would be for any other corporation, the majority shareholder can dictate what happens to some extent. What Fannie and Freddie are doing will still earn profits, whether it's a lower profit or a higher profit. It will not increase their liability in terms of guarantees.

lexa says

there is a potential for a loss that other lenders are reluctant to take (right, 'cause they are just stupid, F&F are the smartest of the bunch that's why they got onto subprime game so late).

Don't really understand what you mean here. Fannie and Freddie didn't really get into the types of loans that are defaulting at the highest rates too heavily.

So, if I understand correctly, every home mortgage in exisitance is being propped up by tax-payers? That sure is a bad idea. When and by what Gov action did this become the way things are? (corn, if you know, then just answer, I am not looking for an AHH HAA to throw at you, I'm just learning)

Are all loans, like car loans and other loans part of the same deal? I mean, most banks lend lots of money in other ways, so, by proxy, if any loans they make are tax-payer supported, then the entire company and all of it's functions are kinda supported the same way too ... man, it would seem that there is something wrong with this picture.

Thanks for the replys thus far.

corntrollio says

Fannie and Freddie enable other lenders to provide lower rates to mortgagors. If they did not exist, you would pay a higher rate on your mortgage. This is a subsidy.

lexa says

F and F force money to become cheaper by offering mortages (underwriting, insuring) services at lower rates vs. competition.

I think there you both are talking about different things here. Corn is suggesting (it seems) that F&F are covering the banks on the loss side to allow them to gamble with less concern, while Lexa seems to be suggesting that the over-all process is made cheaper by F&F offering reduced costs of doing business.
Please continue, thanks.

"every home mortgage in exisitance is being propped up by tax-payers? That sure is a bad idea. When and by what Gov action did this become the way things are?"

home owners vote, renters do not.

http://www.vdare.com/articles/karl-rove-architect-of-the-minority-mortgage-meltdown

Barney Frank and the urban black Dem caucus is guilty of this interference just as much.

The very existence of the mortgage interest deduction is also evidence of this desire to interfere with housing.

"Are all loans, like car loans and other loans part of the same deal?"

No, because cars do not have the same financial footprint as houses in our economy.

Red line is household mortgage debt, blue line is household non-mortgage debt:

http://research.stlouisfed.org/fred2/graph/?g=3iu

thanks

Bap33 says

So, if I understand correctly, every home mortgage in exisitance is being propped up by tax-payers?

No, read above:

corntrollio says

Not all loans are government-subsidized. A loan that cannot be bought by Fannie or Freddie (such as an Alt-A loan made by a private bank during the boom) is not subsidized, nor is a non-conforming jumbo loan or any other non-conforming loan.

Bap33 says

Corn is suggesting (it seems) that F&F are covering the banks on the loss side to allow them to gamble with less concern

No, that's not what I'm saying at all -- I have no idea where you go that. Do you know what securitization is? There are YouTube videos that can explain the basic stuff to you. I'm not going to repeat all that here. Do some reading on securitization and the secondary mortgage market before asking more questions -- you're not understanding this. I'm not trying to be mean, but a little bit of basic knowledge would be useful if you're going to ask questions like this.

Bap33 says

Are all loans, like car loans and other loans part of the same deal?

Car loans and other loans (like credit cars) can be securitized, but it's done by the lenders, not the GSEs.

Bap33 says

while Lexa seems to be suggesting that the over-all process is made cheaper by F&F offering reduced costs of doing business.

nope, their cost were not reduced but rather dumping since they did not prevent them from being insolvent.

this practice is illegal under US laws and as recently as within a month a couple of companies (one if them Chinese) were sanctioned for this.

but F&F are above the US law.

corntrollio says

Someone has to compensate those lenders.

nonsense.

corntrollio says

Fannie and Freddie do not serve the White House, but they are under conservatorship of FHFA, so they can be directed to do certain things. The government happens to by other corporation, the majority shareholder can dictate what happens to some extent.

do you really understand that you just proved me point? Except, not "to some extend", but "as much as they want". majority shareholder keep a tap on CEO balls

corntrollio says

Don't really understand what you mean here. Fannie and Freddie didn't really get into the types of loans that are defaulting at the highest rates too heavily.

then ask yourself why other lenders do not re-fi so deeply underwater loans and read my reply again.

and yes, F&F became deeply involved into subprime lending, just took a later start and high losses.

corntrollio says

Fannie and Freddie worked fine for many years before the current financial crisis caused by wacky private lending. They don't ordinarily take massive losses like this.

And last I checked, TBTF banksters got bailed out by the federal government too, so trying to hold them to a different standard is silly.

some were, other were not, hopefully you're intelligent enough to name them.

Who got bailed out ?

The people and entities that were bailed out were not the banks but the bank accountholders, ordinary citizens and organizations who had checking and their savings with the banks. You, me, your employer, small business, your church, schools, and everyone else who had funds that were lent out to deadbeat home buyers who stupidly over paid for their shack.

Without the Govt stepping in, are you sure your bank was going have your demand deposits for withdraw ?

You should be cursing the home buyers who overpaid not the banks.

but, Thomas, there can be no purchase, or refi, of an over-priced shack without first there being a loan creator willing to write the note. Right?

lexa says

do you really understand that you just proved me point? Except, not "to some extend", but "as much as they want". majority shareholder keep a tap on CEO balls

You misquoted me, but that is absolutely not true. Unless the government owns 100% of the corporation, it cannot oppress minority shareholders any more than any other majority shareholder can.

thomas.wong1986 says

The people and entities that were bailed out were not the banks but the bank accountholders, ordinary citizens and organizations who had checking and their savings with the banks. You, me, your employer, small business, your church, schools, and everyone else who had funds that were lent out to deadbeat home buyers who stupidly over paid for their shack.

Not true. Depositors are covered by FDIC. It's silly to say that depositors got bailed out. Shareholders, incompetent management, and bondholders got bailed out, as did counterparties and things like that.

Bap33 says

but, Thomas, there can be no purchase, or refi, of an over-priced shack without first there being a loan creator willing to write the note. Right?

When prices fall, the risks will be low based on old term lending standards and you will find a lender easily. Lending today, is still risky based on inflated prices. We are not there yet for the SFBA.

thomas.wong1986 says

The people and entities that were bailed out were not the banks but the bank accountholders, ordinary citizens and organizations who had checking and their savings with the banks.

Wrong. The bank owners got bailed out. Ordinary citizens are covered by FDIC.

We've been over this several times. Do you not know the difference between the bank owners and bank customers?