From HW:
A panel on the future of mortgage financing in the United States predicts a government-led initiative to sell distressed properties in bulk. Also, they say Fannie Mae and Freddie Mac will be around for quite some time despite congressional efforts to wind down the government-sponsored enterprises.
“When the conservatorship was established, we thought it would be a timeout for six months,” said Federal Housing Finance Agency Chief Economist Patrick Lawler. “It’s been three years and five months with no end in sight.”
Lawler said the FHFA is working to move Fannie and Freddie into the future, and good progress is being made. A big challenge is anticipating the market direction of the mortgage industry, Lawler added.
Jerry Diamond, a managing director at Annaly Capital Management and director of its related real estate investment trust Chimera Investment, said the recent hike in guarantee fees at the GSEs essentially keep the firms around for another 10 years. He did not feel bills in Congress to reduce the footprint of the GSEs would offer meaningful reform.
“This time next year will probably look like it does this year,” Diamond said.
The panel, which convened at the annual American Securitization Forum in Las Vegas, did offer a forward-looking perspective. Laurie Goodman, senior managing director-RMBS of Amherst Securities, said there is a big expectation the government will sell distressed properties in bulk to investors.
“This is a likely solution,” she said.
Currently, she said, investor capital is being raised to absorb the supply. Furthermore, she said buyers should look to buy up to 100 to 200 properties at a time in localized markets. This will help create a cottage industry around managing the properties.
Saul Sanders, co-CEO of mortgage investor Shellpoint Partners, said that market fundamentals remain challenging, but is confident that it is time to move forward.
“Originations are pristine,” he said, “and no one expects a further 30% decline in house prices.”
Wouldn’t that solve the problem?
just when no one expects it, the unexpected happens…. I would not rule out another 30% decline especially on 1 million + properties.
They are still way overvalued compared to rent.
The “no one” is the same group that never foresaw declines in the first place, which pretty much guarantees it’ll happen.
They said same thing about the Spanish Inquisition.
These people are raising capital, not just talking. Fannie and Freddie will offload their current REO inventory to these folks. The accounting writedowns have already been taken on these properties and the losses will be absorbed by the taxpayer. The bulk sale of these properties will not further depress the resale market – how can they if they are not offered to the retail buyer?
FHFA says (or rather said in 2010) the GSE’s and therefore the government will lose $100 billion if the GSE’s write down loan principal. Yet these already foreclosed properties will be sold in bulk, probably without much of a bid process, at huge discounts. How much will THAT cost the taxpayers?
Oh, wait, the principal writedown losses on the outstanding performing and marginally performing loans have not been taken. Therefore the GSE’s will use forbearance instead of writedowns, because that does not require them to account for the loss today. Mathematically, the ultimate loss to the GSE’s may be the same, but the mortgagor may not feel that way about the deal. I’m sure the folks at FHFA included a rise in defaults in their loss calculations for this plan.
Some will say the elephant in the room is the non-GSE mortgage debt. Less information is available on how losses are being managed by the investors that own the paper. It looks empirically like the paper is being sold off to the vultures and losses are being taken. It’s likely capital also has been and will be raised to buy this paper. A lot of investor entities will get hurt, but there is no evidence of widespread failures yet.
Folks, there is nothing out there except maybe an all out war with Iran or a complete collapse of the EU that would raise unemployment and reduce liquidity enough to cause an additional 30 percent decline in house prices. There is enough demand in most markets to absorb the supply and in the most desirable areas, the old ratios of price to income and price to rent haven’t applied for decades. As my father used to say, when there is 10 percent unemployment, 90 percent of people are still employed. Once people get used to 10 percent unemployment, that becomes the norm.
The people at the conference were probably right. Expect more of the same looks like a darn good forecast.
Nobody expects the Spanish Inquisition!
http://www.youtube.com/watch?v=CSe38dzJYkY
Who cares what these people have to say anyway….arent these names from the original crews that steered their boats straight into the iceberg? Keep talking, perhaps your investors will keep believing you for another year.
Ranieri is playing his poker again, but with a real crap hand this time.