How Many Homes are You Paying For?

The black hole of government marches on.

Both Fannie and Freddie, now effectively owned by the government, continue to struggle.  Alan Zibel reports on their recent performance:

Both Fannie Mae and Freddie Mac have both lost tens of billions of dollars during the past two years and both are asking the government to prop them up. Last week, Fannie Mae requested $1.5 billion after posting a loss of $3.13 billion, or 55 cents per share, in the second quarter.

There is no end in sight for this nonsense. Taxpayers are on the hook for yet another governmental disaster. And it will get worse, much worse as the exposure runs into the Trillions. Zibel summarizes:

Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. They buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors.

The exposure to taxpayers is getting greater by the day. The mortgage market has effectively been nationalized. Estimates are that 90 – 95% of all new mortgage loans are being made or guaranteed by a government agency. Loans continue to be made to unqualified buyers. It is all part of the scam to make you believe the housing market is getting better. Don’t fall for it.

Does this post from Calculated Risk make you feel any more comfortable about the solvency of Fannie, Freddie or the FHA?

The combined REO (Real Estate Owned) inventory for Fannie, Freddie and the FHA increased by 13% in Q2 2010 from Q2 2010. The REO inventory (lender Real Estate Owned) increased 74% compared to Q2 2009 (year-over-year comparison).

This graph shows the REO inventory for Fannie, Freddie and FHA through Q2 2010. (Click to enlarge.)

The REO inventory for the “Fs” has increased sharply over the last year, from 135,868 at the end of Q2 2009 to 236,338 at the end of Q2 2010.

This is a new record for Fannie and Freddie; the FHA’s REO inventory decreased slightly in Q2 2010.

Remember this is just a portion of the total REO inventory. Private label securities and banks and thrifts also hold a substantial number of REOs.

Why should we expect this to end nicely? Everything that the government is involved in is either bankrupt or close to that state.

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