September 11, 2008
JusteQuotes: Delaying The Inevitable For Another 90 Days?
"U.S. Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days."
∙ Senators Ask Fannie, Freddie to Freeze Foreclosures [Bloomberg]
First Published: September 11, 2008 1:30 PM
Comments from "Plugged In" Readers
Sounds like 3 months more of free rent to me...
Posted by: Ryan at September 11, 2008 1:40 PM
One of the dumbest ideas to come along so far. The USG is doing its best to turn this into a Depression that's for sure!
Why would any smart person put down his own hard-earned cash on a property when he knows that there is pent up supply and that therefore he shouldn't trust the prices? Why would any smart private lender lend against assets that are mispriced, unless the borrower is willing to put down a huge pile of dead presidents?
And did anyone notice that Uncle Sugar is now going to try to lock more people into their depreciating houses by increasing down payment requirements for the "new & improved" GSEs?
The gameplan is pretty clear, the same one they have been following for about 2-1/2 years now: boil the frogs slowly.
Posted by: Satchel at September 11, 2008 2:24 PM
I'm so dizzy, my head is spinnin'
I have my box of pop corn and I'm going to watch this play out.
Posted by: Michael L. at September 11, 2008 3:27 PM
And the hits keep on coming...
USG Assisting in Sale of Lehman Brothers. Next Friday it will be WaMu.
Posted by: unearthly at September 11, 2008 3:32 PM
Michael L. It was all so predictable, you could practically set your watch by the timing of the events. From my post 3 days ago:
"In the short run, interest rates will almost certainly go down... Do I think the dems will allow the portfolios to decline 10% per year. Nope. Do I think, however that the lending standards will go up. Yes...That will then be counterbalanced by a "foreclosure holiday" the dems will put in place."
How did I do prediction wise?
Posted by: tipster at September 11, 2008 3:37 PM
Ugh, I don't see how you can eat your popcorn, Michael L. All this news makes me rather nauseous. It's a bit like the feelings I had after the 89 earthquake. The aftershocks kept coming, and it took a long time to feel steady again. Perhaps today's anniversary also adds to that feeling.
Any advice from you financial types about what to do with cash? We have our future down payment and security cushion in various banks right now (including WaMu, but no more than the FDIC insured limit in any bank). I keep thinking that there must be a better place to put it, but everything is too shaky for my nervous nellie nature.
Posted by: RenterAgain at September 11, 2008 4:24 PM
I have posted the same thing a few times. What to do with the money under the pillow???
Posted by: sparky at September 11, 2008 5:15 PM
Here's a scary thought : Is it possible that the FDIC is oversubscribed and has no real way to cover everyone's $100Ks spread around in multiple bank accounts if > N% of banks fail ? But the feds know that it is very likely that M% of banks will become insolvent where M > N.
So the Feds are in the process of absorbing those M% of banks and then the USG itself will declare bankruptcy, absolving the requirement for the FDIC to make good on the insurance.
Disclaimer - I'm totally just pulling that scenario out of the air. Someone please tell me this can't happen.
Posted by: The Milkshake of Despair at September 11, 2008 6:01 PM
The FDIC is as sound as the dollar. Literally.
Posted by: NoeValleyJim at September 11, 2008 6:06 PM
I am not a finance guy but I have invested my money in banks overseas. Indian banks for example pay 17% interest for some customers.
Posted by: asad at September 11, 2008 6:08 PM
Sure it could happen - if the powers that be choose for it to happen.
Or they could just print up enough money to make everyone whole - if that's their choice.
So the question you have to ask is, "Do I feel lucky? -- Well, do ya, punk!" No, sorry, wrong question (but very apropo to SF).
The question is, "What will the powers that be choose to do." I'm betting that they will preserve the financial system, as that is their power base, so I'm betting that they will fire up the printing press if necessary and bailout all the bank depositors.
Posted by: diemos at September 11, 2008 6:12 PM
The FDIC already knows they will run out of money, and are making arrangements to "borrow" from the treasury.
Posted by: tipster at September 11, 2008 7:11 PM
I agree that this is insanity - the Republicans and Democrats are trying to outdo each other with increasingly irrational ideas. Why can't we just let home prices reach equilibrium without interference? Will the taxpayers now be on the hook to fund the GSE's obligations during this proposed deadbeat holiday? Our gov't certainly wouldn't want PIMPCO or the Chinese to suffer during this moratorium. As a taxpayer, I think I'd rather have my tax dollars used to complete that bridge to nowhere in Alaska.
Posted by: FSBO at September 11, 2008 9:33 PM
personally i think whatever tipster or satchel have to say is generally speaking a paradigm for the benefit of all mankind
Posted by: anon at September 11, 2008 11:07 PM
90 days is very significant. Look at mortgage rates, they are down 50-100bps, depending on what type of loan you are taking. It takes 30 days or less to refinance, esp if you are refinancing with your existing bank since they have all your documents.
If you have a 1mil mortgage, and lower your rate by 60bps, you get to save $500/month. 500K mortgage and you save 100bps, you save 410/month. That is huge money.
Posted by: Prime at September 12, 2008 6:51 AM
Lower rates are not going to help those that bought a place in the last few years (or those that refi'd to take most of their equity out). Refinancing will be difficult due to the decline in values.
Lower rates will help to stimulate demand as more people will be able to afford the payments, but coming up with downpayments and meeting the newer (ie older) tighter lending standards will still limit demand. Home prices will continue to fall.
Posted by: Rillion at September 12, 2008 8:48 AM