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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (257616)	7/12/2008 9:18:13 PM
From: rich evans	Read Replies (1) \| Respond to of 793955

I posted this on Mishes Board. Fannie and Freddie make no sense to me. CIT had average loan to value of 82%. Average loan about 130,000. They reeported delinquencie reported last two quarters of about 12% of total unpaid balance of about 9 bill. Nonperforming was 12% as was 60 day delinquencie with rollover 100% and loan severity at 50%. CIT capital was 10%. Wash Mutual with their total loan loss estimate of 12 bill over next 3 years on a book of 200 bill is about the same as 12% of 200 bill is 24 bill and collecting 1/2 on foreclosure = 12bill. Of the Wamu loans only 16bill is subprime. Wasmu capital is about7% I think. Now lets look at Fannie and Freddie. In large round numbers they each hold close to 1 trill of loans or 2 trill together. They each guarantee about 2 trill of loans sold to others or 4 trill all together. They have each about 40bill in capital or 80bill together which is about 1.5% of these loans/guarantees. They are saying their loss is only about 1% or so. A 1% loss would equal about 2% delinqency rate. HOW COULD THIS BE? CIT had a 12% delinquency on its prime mortgages. WAMU has the same and FNM and FRE are saying they are only 2% or so delinquency and 1% writeoff. With only 1.5% capital, if FNM and FRE approach the CIT or WAMU or Indy or Countrywide delinquencys then they are way insolvent. Say 10% writeoff of 6 trill total is 600 bill and they have 80 bill capital together. These are just general numbers, but this is the picture I see. FNM and FRE can't raise that kind of capital. The Government and FED will have to bail them out. Shareholders will lose everything if these credit metrics for FNM and FRE happen like CIT and WAMU. Housing prices better start going up . Only way to save the day Rich