Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Elroy Jetson who wrote (26360)	12/30/2004 9:49:29 PM
From: Ramsey Su	Read Replies (1) \| Respond to of 306849

NS, I am not privy to fight between the political friends and enemies of Fannie Mae in particular, but the function of Fannie Mae will be retained. Investment Banking firms like Goldman Sachs or Bear Stearns as well as larger banks like Citibank or JP MorganChase could easily take over Fannie Mae's function. For this reason they are likely one of the political enemies of Fannie Mae. Freddie and Fannie, in addition to providing a secondary market, also provide some type of lending standards in the form of a "conforming" loan. Many lenders underwrite using this standard to preserve the option of dumping the loans on the GSEs or holding them in their portfolio. In the old days, jumbles and hard money are the most common non-conforming loans, so were the adjustables. Today, with such easy money everywhere, junk loans can be packaged and sold with very little additional cost. The GMACs, LEND, NEW all have no problem selling their loans. Will this come back to haunt the system? Lets look at another potential tsunami, the FICO score. While credit has always been important, it has never replaced income ratios to the degree that they have now. FICO score is based on the likelihood to default using other people under similar financial circumstances. The last few years have been a lenders' dream, lots of borrowing and very little credit loss. Could the FICO scores itself reflect an unreasonably optimistic profile of a credit quality which is supported by first the equity, then the real estate bubble.