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

To: Mike da bear who wrote (14964)	11/10/2003 2:56:51 PM
From: ild	Respond to of 306849

Well, borrowing short term and lending long has been a good business for many years, but it can easily reverse and become a bad (or very bad) business. There are many middlemen in the mortgage business who feed from interest rate spread, so I think FNM/FRE margin is much smaller. It should take them like a year to recoup the fees. I don't understand how FNM/FRE can hedge their risks. Mortgage market is now bigger than treasury, so the counterparty to their hedge should reside on a planet bigger than this.Well, borrowing short term and lending long has been a good business for many years, but it can easily reverse and become a bad (or very bad) business. There are many middlemen in the mortgage business who feed from interest rate spread, so I think FNM/FRE margin is much smaller. It should take them like a year to recoup the fees. Like in any other Ponzi game in order to cover their problems they need to grow their portfolios faster and faster which is exactly what they are doing. I don't understand how FNM/FRE can hedge their risks. Mortgage market is now bigger than treasury, so the counterparty to their hedge should reside on a planet bigger than this. Another Ponzi game is auto financing. Has anyone seen numbers on delinquencies in Ford/GM humongous loan portfolios?