US Gov takes over Fanny & Freddy

The two largest mortgage finance companies in the US, Fannie Mae and Freddie Mac have been taken over by the US government in an effort to become the most expensive financial bailout in US history.  ..no sorry, that’s not the underlying goal..  They’ve been taken over because they were ‘too big to fail’ – their collapse would have caused turmoil in financial markets in the US and around the world.

No final word on how much this bail-out will cost American tax payers, but the rough estimate of $25 billion has been called ‘too optomistic’.

The plan also commits the government to provide as much as $100 billion to each company to backstop any shortfalls in capital. It enables the Treasury to ultimately buy the companies outright at little cost. It bans them from lobbying the government, putting an end to their ability to use their political machine on Capitol Hill.

It also eliminates dividend payments to current shareholders while protecting the principal and interest payments on the debt, now held by foreign central banks, financial institutions, pensions funds and others.

The Treasury will force both companies to shrink their portfolios over the long term; they now hold or guarantee about half of the country’s mortgages. In addition, the government plans to buy significant amounts of their mortgage-backed securities on the open market, beginning with the purchase of $5 billion worth this month. This step, never before undertaken by the government, could begin to restore some confidence in the credit markets and lead to lower interest rates for home mortgages.

In Canada the CMHC has taken steps to try to minimize speculation and the risk of bubble markets by eliminating the insurance of zero down and fourty year mortgages introduced a couple of years ago. Have these barndoors been closed too late?  Will a collapsing housing market in Canada bring a taxpayer bailout of the CMHC?

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SuperMan
SuperMan
12 years ago

…American men have a five-year survival rate of 66 percent — compared to only 47 percent for European men. Have to be careful looking at things in isolation. While UK has lower cancer survival rates than the US, the US has a higher cancer death rate than the UK. Basically, your odds of surviving cancer *should you get it* are (arguably) higher in the US – but the odds of actually getting cancer are also quite a bit higher in the US. The net effect is that Americans are more likely to die from cancer than residents of virtually any other G7 country. Further, cancer death rates inside the US have tremendous variation following a fairly distinct geographical pattern. Basically, there are large swaths of the US where your odds of dying from cancer are 50% higher than in other… Read more »

JB
JB
12 years ago

US Is "More Communist than China": Jim Rogers

"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this," Rogers told "Squawk Box Europe."

http://www.cnbc.com/id/26603489

jesse
jesse
12 years ago

"Important to consider: The UBC report is specific to detached homes, not condos or townhouses."

Prof. Sommerville et al are claiming roughly 2-3% real growth for detached properties. That is significantly above the population growth rate. Real growth for detached homes cannot exceed real income growth and population growth because, despite rumours to the contrary, there is still vacant land on which to build.

Perhaps, instead of being lost in the morass of underutilised asset valuations, they should have started with determining fair valuations of fully densified condos.

condohype
12 years ago

Important to consider: The UBC report is specific to detached homes, not condos or townhouses. That said, the 11% decline seems low. Based on my own living situation calculated using Mohican's fair value formula, the place that I rent needs to fall by 40% before it's fairly priced.

Strataman
Strataman
12 years ago

mk "Tsur is smoking crack." No I read on another blog that he's into cream cheese and bagels, in fact I think I saw him behind a dumpster snorting some cream he'd just bought from Cameron! 🙂

mk-kids
mk-kids
12 years ago

Tsur is smoking crack. We've long susected this was the case, todays "report" confirms it. 7 to 11% for Van & Calgary, 20% for TO?!!! ROFLMAO!

Brittanny
Brittanny
12 years ago

Krissh STFU

Anonymous
Anonymous
12 years ago

call the owner it's gone

bdk
bdk
12 years ago

Boomerang.

Here is a reasonable deal

"$1250 / 1br – Coal Harbour 1 Bedroom w/ Parking & Locker (1166 Melville St., Van BC) (map)"

It's on craigslist right now.

bdk
bdk
12 years ago

Krissh STFU

Thums up2
Thums up2
12 years ago

*UBC Study is based on old data.*Current rental market condition is too tight,*tenents are flooding in response to listed units,*lots of parents are waiting for their children to get in school,*decisions are pending or being reverse or skip to next school,*b.c transit has extend the size of buses by 20% *still too short compare to the increased numbers of immigrants and migrants,B.C taxi drivers association is looking more taxi and drivers only one taxi per 1000 people *rents are up and coming *$5000 / 3br – Luxury Living at its Finest.

While smart buyers and fool sellers will be countinue MR.BEAN will be loughing his ass off because study show 10% Reduction =10% of REALTORS COMMISION.-Shakira and enrique eglisia

bdk
bdk
12 years ago

A 2 level loft at the Hudson, 870 sq ft, can be had for $1700 and it has 1.5 bathrooms.

It's a loud street and there are a lot of panhandlers around but the building is pretty nice.

jesse
jesse
12 years ago

"I agree that is what people are asking,it is hardly DATA what a joke this is a University paper?"

Strataman, using craigslist data is the LEAST of that report's problems. Its calculations are fatally and fundamentally flawed. What a disaster; it's embarrassing even for the Sun's editors its conclusions were published. A professor in a first year finance course would have failed this paper on the spot.

bdk
bdk
12 years ago

Yaletown rents for about 10% more than Coal Harbour. About $2.20 per sq ft is realistic to pay. Landlords do get more on occasion but they are sometimes renting to international students and people with dogs, sketchy "jobs" and references etc. The only 1990's buildings in yaletown that have close to 1000 sq ft units would be the 1000 beach complex or rosedale on robson and they are more like 900 sq ft and they are EARLY 90's so not less than 8 years old. The beach towers have had property management companies advertising 1150 sq ft units in the $2k range, it was a listing with Rancho. For coal harbour the palais georgia was built in 1990 and has 1200 sq ft units and also rents for quite cheap, although there is a humongous disparity between landlords ($1800-$3000 for… Read more »

squidly77
squidly77
12 years ago
Strataman
Strataman
12 years ago

condohype "This is an extremely poor way of establishing local rents. Craigslist prices in particular are fantasy rents." Rent data? I agree that is what people are asking,it is hardly DATA what a joke this is a University paper? Makes one wonder what a degree from said University is really worth! 🙂 I know for a fact that anyone actually aware of pricing pays substantially less then Craiglist averages..and that's why a lot of Craiglist is "available NOW" as it sits empty! 🙂

Strataman
Strataman
12 years ago

YLTN "Any suggestions of what reasonable rent should be, say for a building less than 8 years old." Well for one thing they don't make that size of 1 bedrooms in buildings 8yrs old or less. I guess if there is one out there you would pay the same as a two bedroom of similar size. Probably $2000/month in Yaletown or Coal Harbor less in Burnaby or Coquitlam ($1600.)

YLTNBoomerang
YLTNBoomerang
12 years ago

Speaking of fantasy rents…

I'm looking for a 1 bdr den for two of us to move into downtown; a real 1 bdr den of normal 1990's size of 1000sqft not the micro apartments they are constructing now. Any suggestions of what reasonable rent should be, say for a building less than 8 years old.

Vansanity
Vansanity
12 years ago

chip – First, I'm sorry for even going there, this is a real estate forum, I'll make this quick. Yes, I'm aware that 19% of the budget goes to such things. So what? I'm also aware that 47,000,000, that's 19% of Americans have no health insurance. Your stats on cancer survival were supposed to impress me? Not even for one second. Here's some stats on topic: Nearly 90 million people – about one-third of the population below the age of 65 spent a portion of either 2006 or 2007 without health coverage. And…8 in 10 uninsured people come from working families – almost 70 percent from families with one or more full-time workers and 11 percent from families with part-time workers Also…Nearly 40 percent of the uninsured population reside in households that earn $50,000 or more. A growing number of… Read more »

condohype
12 years ago

From today's UBC study: "For each metropolitan area we match rents by type of house and location with price data. The rent data come from Craigslist and classified ads in local newspapers."

This is an extremely poor way of establishing local rents. Craigslist prices in particular are fantasy rents.

kissmyshinymetalclas
kissmyshinymetalclas
12 years ago

Hey Chip, that's a mighty unbiased report you're quoting there…

http://en.wikipedia.org/wiki/National_center_for_

"The National Center for Policy Analysis (NCPA) is an American non-profit conservative think tank."

Global warming deniers as well.

chip
chip
12 years ago

Vansanity says: "Americans, seriously… state run mortgage lending is ok but state run healthcare is communist and will mean the destruction of your free state?" Are you seriously really unaware that US state governments spend about 20% of their budgets on health care, or that Medicaid covers about 40 million low-income people, that Medicare covers another 40 million disabled and elderly? Or that US government healthcare programs are the world's largest, and that the US spends more per capita on healthcare than any large country on the planet? Many Americans oppose universal state-run care not because it's "communist," but because it would increase wait times, deprive them of treatments and , as in the UK's NHS, result in high rates of death from serious diseases like cancer. Study: "According to the survey of cancer survival rates in Europe and the… Read more »

Anonymous
Anonymous
12 years ago

No problemo, the mortgages are CMHC insured (well at least those for over 80% financing, and I don’t see many defaults for the rest). So the taxpayer is holding the bag.

I think your taking our loan situstion as a total safe bet, I think Coast Capital is heavy into personal loans using home equity, demand loans so to speak. I believe they could have millions of dollars of unsecured speculative loans.

patriotz
patriotz
12 years ago

For a long time they were running ads about how they would give mortgages to just about anyone, which implies a lot of bad loans.

No problemo, the mortgages are CMHC insured (well at least those for over 80% financing, and I don't see many defaults for the rest). So the taxpayer is holding the bag.

Where they might get in trouble is with construction financing and other business lending tied to RE. This has taken other CU's down in the past

"We think this is good for Fannie and Freddie because the US government used to be invisibly guaranteeing them, but now it is taking explicit action to positively guarantee them," said Bank of China spokesman Wang Zhaowen.

http://news.bbc.co.uk/2/hi/business/7603754.stm

Uncle Sam's loan shark has spoken.

bdk
bdk
12 years ago

http://www.canada.com/vancouversun/news/story.htm

Looks like UBC has decided that the prices are coming down after all.

Maybe it'll just be for one month and then will go up again just like Miami, Las Vegas and California.

John, what are you doing this afternoon? I'll drive if you want to go buy up some assignments.