Almost as fast as I suggested 3 days ago that nationalization of Fannie and Freddie was likely, it seems that everyone has jumped on the bandwagon despite assurances.
Does it matter? Lending is changed forever.
Fannie and Freddie are going to have a threesome with Uncle Sam. Dirty, ugly, and seemingly unavoidable after 2005. It just had to happen, the whole world went mad with real estate. This place seems so F@$&#D up. I am now worried more about serious social unrest coming in parts of the US. I’m pretty ticked off and I’ve got a lot, think about those who have lost jobs and have lots of time on their hands. I’m just sayin’, I think lawmakers need to be careful when they start committing taxpayers’ money. It is ours, after all.
This article has a text-book case of how something was very, very wrong, and could be considered a strong argument for the utter failure of the regulatory oversight of F&F:
http://online.wsj.com/article/.....eal_estate
Basically, they don’t want to stop taking insurance policies from companies they know will default on them (and thus cause them losses) because it would hurt their short-term profits before the impending collapse/bailout.
I can only hope that when we, the taxpayers, get shouldered with the trillion dollars or more of losses these greedy companies have accumulated while making their executives and shareholders wealthy, their “regulators” get dragged out into the street and shot, figuratively or literally, I don’t care. It’s the least the government could do after letting this debacle get this far, this ugly, this atrocious.
As I read the doomsday (Freddie and Fannie) scenarios yhat are coming to the surface, it is hard not to get any emotions involved. Here is my emotion: I am scared $h1tL3$$. Personally and locally I am at low risk with my finances, my bases are well covered (cash is king, and investments are mostly sound). The concerning part is the welfare of our country and its trickle down effect to the rest of the world. How many straws can we add to this camels back? Fannie, Freddie and Indy are three more large sticks. Who can now possibly argue the fundamentals that we are in serious trouble here as a nation? McCain and Gramm are trying (rolling my eyes), good luck with that one fellas. Even Bernanke and Paulson are getting punchy.
Why am I scared? Our debt culture nightmare has just arrived on all fronts. My prediction, is that within the next three years the debt riddled citizens, banks, corporations, and municipalities that are in over their heads, will bring the rest (the few fiscally responsible that are left) of our society to its knees. The negative trends we are seeing are accelerating. The words uncertainty, desperation, chaos and violence are the first to come to mind.
I know this sounds dramatic, and drama queen I am not. Nor do I claim to be reading a crystal ball. It is just to the point now that we are looking a the perfect financial storm brewing in the US economy, and if anyone out there could show me where the life boat is, I would like to know. There is nothing left to shore up the hull, we are flooding and the eye is long to arrive.
Have I just been reading too many bubble blogs or do the fundamentals feed my gut? Maybe its time for me to cash out and disconnect for a while.
Keep up the good work Ponzi (thumb up).
You’re not far off. it could all happen within the next couple of years. What goes up must come down…unfortunately the bastards on top need not worry…they hide and control in the US.. they learned in old world Europe.
Thanks Chuck…you’re right! time to sell in AZ even though the rent is very low, it should be well over 3k…but selling does make sense and invest heavy in Iraqi Dinnars.
Hmmm. I wonder if I shouldn’t just max out the credit cards on cash advance, since soon either (a) the debt will be inflated away anyway, (b) the streets will be on fire and it will be irrelevant, or (c) there will be so many other bankrupt people that it won’t really be held against me anymore?
Wow, this is farther than I thought it would go.
I’m wondering what I should do. If I buy a house and my lender goes under, will the people who funded my lender just take my house even though I can make payments on it? Basically, what are the pitfalls of buying a house now besides the probably future lower housing prices?
If your lender goes under you just keep making your payment. No one can take your property as long as your payments are current.
It’s the same as when your lender sells your loan to another company, and in essense, that’s what happens. If your lender get’s taken over by the FDIC, as in the case of Indy Mac, the loans are part of the assets that will be sold to satisfy the debts of company.
Property values are a far bigger concern.
It’s almost hard to believe that once we lived like Kings on extended credit and no concern about the dynamics (or lack of fundementals) of what led us down this path…. It will be interesting now that IndyMac has been taken out by the FDIC. I’m not sure if I heard the numbers correctly, but a reporter indicated the IndyMac recovery would eat up nearly 35% of the FDIC reserves??? Does anyone have information about the financial strength of the FDIC and how their position will hold should their be more larger institutions that fail?
Last I read the FDIC had roughly 52 billion in reserves, and they estimated IndyMac will cost between 4 and 8 billion. However, I’m sure the FDIC’s estimate is optimistic, and depending on how long it takes them to unload their horrible loans (and consequently how much the RE market falls between now and then), I’m guessing it could be far worse. Every day they continue to hold the underwater mortgages waiting for the market to “turn around” they lose more money.
On the other hand, as I understand it, their financial strength is that of the US government; unlike the GSE’s which were only implicitly backed by the US until yesterday, the FDIC is explicitly backed by our government, so there’s no reason to believe they will fail to cover insured amounts 100%. They can take all the losses they want, and the only downside for depositors is the devaluation of their currency as the government prints more to cover all the bad debts they are holding, encouraging, buying, insuring, and currently still creating.
This is a time to tip-toe around the real estate market. Freddie, Fannie and Uncle Sam are not offering any security to buyers. It will be interesting to see what happens.