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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Les H who wrote (234258)12/24/2009 5:53:50 PM
From: rich evansRead Replies (2) of 306849
 
There really is no alternative. With the 6 trillion of Fannie/Freddie Loans out there either directly or guaranteed, and 10% losses then we have 600 bill in losses. They have taken a lot of these loan loss provisions already but there is a lot more to come. With the Treasury guaranteeing their debt and the Fed buying it, there is no need for capital to absorb losses and there is really no capital left. So with the interest rate spreads available when your cost of funds is 0, both Fannie and Freddie should be able to earn back their losses from net interest income and fee income in about 10 years. What other plan is possible? We need home mortgages and they are really the only game in town left except for FHA. Fannie and Freddie had 50% of the total mortgage market of 14 trill at one time. They probably represent more now with FHA. Give them all the money they need to earn their way out of this abyss is the plan.

Rich
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