From the And this is a good thing? department:
NEW YORK, Sept 17 (Reuters) – Fannie Mae and Freddie Mac, the top providers of funding for U.S. residential mortgages, will likely boost their share of the mortgage bond market by 40 percent in the second half of 2007, according to Lehman Brothers Holdings Co.
The so-called agencies are seen issuing $380 billion in mortgage-backed securities during the last six months of the year, or 70 percent of the total, Lehman analysts said in a research note on Monday.
The share — albeit in a shrinking market — would be up from 50 percent last year, it said.
Here’s my question: Is a bigger piece of a poisoned pie really worth the agencies sinking their teeth into?
[Hat tip to Metroplexual for the image!]
Freddie and Fannie- bon appetit!
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This is a smaller piece of an even smaller pie! FNMA is increasing thier share because nobody else is buying anything!!
The bad loans were made when things seemed “good” in the past few years. The same time the agencies were sitting out the markets for a variety of reasons including their relationship with their regulator, OFHEO, and because they felt that the markets were mispricing credit risk. Now that the risk is being correctly priced, actually overpriced, they will come on in and clean up with very, very profitable business. In fact, the next two years, the GSE’s will own the market and make lots of $$$$
mm99 -
Sure they’ll make lots of money, but what if something goes wrong? That’s not just their competitors that are heading for the hills, its their counter-parties. F&F have got to be the world leaders in off-balance-sheet deals, and they don’t appear to have nearly enough capital to afford any significant amount of that stuff coming home to roost.
Mortgageman-
While resets have created problems for many homeowners, falling prices have created even more. It looks like price declines are going to be with us for awhile. Anyone who manages to refinance at current market value could end up in trouble if they need to move, or might not be motivated to make their payments if people are purchasing homes around them for significantly less.
I also have to wonder why, if these loans are such money makers and risk is now priced properly, why other mortgage lenders aren’t willing to buy them.