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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (14963)	11/10/2003 2:43:02 PM
From: Mike da bear	Read Replies (1) \| Respond to of 306849

I was wondering about the losses on serial refi's but then I came to this conclusion. The mortgagors are borrowing fed short term money at < 1%, charging you 5 to 6% for a 15 to 30yr mortgage. Therefore in 3 months of interest payments by the mortgagee you recoup the fees. The risk of course is if rates go up in that 3 months from when you gave out the loan to when you finally sell it. But with FNM/FRE hocus-pocus hedging maybe they claim to eliminate that risk. So effectively they're using short term fed money but collecting 30yr loan rates.

To: ild who wrote (14963)	11/10/2003 3:54:41 PM
From: valueminded	Read Replies (1) \| Respond to of 306849

Actually, they still service the loan so I do not think they sold it - and pocketed any money. That is what I originally thought, however. I guess since they do borrow short and lend long, they make the money up in a hurry anyway. I think that eventually (when the rest of the world gets tired of propping up the dollar) FNM and FRE will be in for some severe migraines and that will take a portion of the real estate market with it. The good news (for homeowners) is that inflation will skyrocket as all the excess dollars come home to roost. The bad news is that credit will dry up so monetizing those assets will be difficult. Not sure how to hedge this type of thinking. Maybe a good closed end commodity fund (which isnt at a premium) . . Any ideas out there ? thanks