"Riskiest Mortgage Bonds May Fall as Fannie Mae Cuts Purchases "

first i must say that is a joke that a company like fannie mae that has had big big accounting problems in the past (no correct filing for a few years with a restatement over 6 billion) is such a major player in the sub prime market and buys lots of "nontraditional mortages" from lenders that cannot unload the crap fast enough.....

i am sure that regardless what fannie and freddie do the spreads in the sub sector will increase. but it will help for sure. one has to wonder if the slump is great enough maybe the loosen their standards to bail someone out.....(but this is only a guess and fear.) in the past almost all central banks around the world bought the major portion of the fnm and fre bonds.

zuallererst muß man sagen das es eh ein witz ist das ne firma wie fannie die über mehrere jahre keine bilanzen vorlegen konnte und ne berichtigung von über 6 mrd $ vornehmen mußte ein wichtiger spieler im sub prime markt ist. die kreditgeber können ihre "schrottkredite" nicht schnell genug aus ihren büchern tilgen. da paßt es gut wenn ne "halbstaatliche" organisation alles was bei 3 nicht auf den bäumen ist aufkauft und damit ins risiko geht. kein wunder das diese geschichte ausser kontrolle geraten ist.

bin mir aber trotzdem sicher das unabhängig davon was fnm und fre machen weden die spreads weiter stark ansteigen werden. meine größte sorge ist eher das wenn nichts mehr geht die ihre standarts wieder auf null fahren und so den markt retten wollen (sicher mit unterstützung des staates). auffällig in letzter zeit war das der großteil der fnm und fre bonds von den zentralbanken aufgekauft worden sind.


Dec. 20 (Bloomberg) -- Bonds backed by mortgages to the riskiest borrowers may weaken next year as Fannie Mae and Freddie Mac, the largest providers of money for U.S. home loans, cut their purchases, according to Friedman Billings Ramsey Group Inc.

The federal regulator of the government-chartered companies this month told them to tighten standards on ``nontraditional'' mortgages they finance. Waning interest by Fannie Mae and Freddie Mac in so-called sub-prime mortgage bonds would boost the yield premium investors demand to own them,...

Wider spreads on the top-rated AAA classes of such securities that Fannie Mae and Freddie Mac typically buy may raise mortgage rates for sub-prime borrowers, who have poor or short credit histories or high debt burdens. A housing slump and the highest level of late payments on sub-prime loans since 2003 have pushed up spreads on the lower-rated bonds in recent months....(this is quite an understatement.../ ne leichte untertreibung...)
New Policies
Fannie Mae and Freddie Mac, which own about 15 percent of the $10 trillion residential mortgage market, last year bought $221.3 billion of ``non-agency'' mortgage securities, or those not issued by them or government agencies such as Ginnie Mae, according to Friedman Billings. Assuming all the purchases were of sub-prime mortgage bonds, they bought 37 percent of the total new volume, the firm said.

The Office of Federal Housing Enterprise Oversight told Fannie Mae and Freddie Mac on Dec. 8 to create http://immobilienblasen.blogspot.com/2006/10/lending-guidelines-kreditrichtlinien.html policies on nontraditional loans"that mimic what federal regulators asked of banking companies three months ago, including that lenders assume borrowers face higher payments than initially required in evaluating the consumers' ability to pay off the debt. ( what a concept..., was ein fortschritt....)

Nontraditional mortgages include interest-only loans and option adjustable-rate mortgages, whose minimum payments don't cover the interest owed (like in the cartoon...). Bank regulators also may require tougher tests for common sub-prime ARMs, with rates that rise after two or three years even without higher market rates, ....

Late Payments
The seasonally adjusted rate of late payments on sub-prime loans rose last quarter to the highest since the first three months of 2003, climbing 0.93 percentage point from a year earlier to 12.56 percent, the Mortgage Bankers Association said. http://immobilienblasen.blogspot.com/2006/12/us-mortgage-delinquencies-jump-in-third.html

Congress created Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac to expand homeownership by increasing mortgage financing and provide market stability. ( bur a what price.../ aber zu welchen preiß....).

.....They've turned to the market because of narrower spreads on their own securities and rising regulatory targets on how much financing they must provide to low-income borrowers.

The typically largest floating-rate AAA classes were sold last week at spreads of 20 basis points, the least this decade, Friedman Billings' Youngblood said in an interview. Spreads on top-rated sub-prime bonds haven't widened because rating firms have required them to be protected against large losses, he said.

Still Sound
Even if spreads on AAA sub-prime bonds widen due to less demand, the credits are still sound, according to Youngblood.

``I can't envision anything short of the Great Depression of the 1930s that would bring into question the interest and principal of AAA classes,'' ......and wee all know that youngblood is always right....http://immobilienblasen.blogspot.com/2006/07/fundstck-des-tages.html

Letters from Ofheo to Fannie Mae and Freddie Mac don't explicitly say they must apply bank regulators' guidance to bond purchases.(read this twice!) The regulator does expect them to develop systems that ensure they avoid buying securities with loans not conforming to the directive, according to Corinne Russell, a spokeswoman (like the acounting model..... :-), wie das buchführungsprogramm....;-)

Non-agency securities make up about 40 percent of the U.S. mortgage-bond market. About 15 percent of Fannie Mae's $725.5 billion mortgage portfolio, or $108.6 billion, was made up of such securities on Sept. 30, compared with 13 percent, or $97.8 billion, a year earlier. About 33 percent of Freddie Mac's portfolio, or $235.7 billion, was made up of them on Oct. 31, compared with 34 percent, or $232.4 billion, a year earlier.

Sellers of sub-prime bonds to them include Countrywide Financial Corp. and ACC Capital Holdings' Ameriquest Mortgage, according to Friedman Billings.