Wednesday, January 29, 2014

trying to figure out what is really gonna happen to fannie

eckgar1  Jan 4, 2014 10:30 PM

trying to figure out what is really gonna happen to fannie

so the politicians say they dont want to have private reap the rewards in good times and the taxpayer bailout in bad time. they follow this with talk of closing fannie. so What are they saying?

I will say this with 3 trillion in holdings, 5% would be 150 billion. so the backstop they want is 10% this would be 300 billion for just fannie. fannie needed 117 on this, the worst turn-down ever. on all other recesions since fannies inception fannie has always made it through with no bailout. what was different? the banks were different. they defrauded and lied about the holdings they transferred to fannie. this was different this time around.
So when the politicians say private reap rewards, we all feel it is the shareholders they are talking about. but this is far from true. they dont even acknowledge the shareholders of this company. the private they speak of are the bonds. the sellers of the mortgages to fannie and the investors in the bonds who reap the interest.
So why the talk of closing fannie? they need a scapegoat for their policy that allowed and MADE fannie take the risks that they took in the downturn. fannie has been exonerated on every level of the judiciary of our country and yet the legislative branch and executive clearly blame fannie, the rape victim. why? To bury the lies they have told for 5 years. IMO.

Anyway the risk sharing bonds that fannie is using now would rid the political talk of private reaping the rewards. and this is really how this all plays out. after this talk is removed and after February quarter comes in, there will be huge profit to govt and with risk sharing the taxpayer will not be on hook anymore. and any future failure will be on the backs of the banks, without the lawsuits. lets face it the investors have no idea what is being bundled if it full of lies and if these bonds are to sell to investors the issuer is gonna have to take it on the chin if they were wrong. this is the banks. and not fannie. so bottom line is...........
the bottom line is the banks will write these loans properly and the system will work, but if the bundle falls apart, then the bank gets skin in the game on the loss. this will bring the 10% to the banks and off the balance sheet of fannie. BOOM. 
one more thing will be the change in accounting that caused fannie to go negative in the first place. with the change their would be no right down and there no dta before the forclosure settles. no more write down of a guessed amount of loss. this is how fannie went negative, they had to guess at the losses. BUT as we all know they over guessed. so the DTA came flying back in. THE change will eliminate this and allow them to take the loss at the end after the forclosure is settled. NO MORE GUESSING. 
ALL these changes are in place and are working down the pipe. lets not forget corker warner bill will be dead by the time fannie reports the 45 billion 4th quarter and will have paid 30 billion extra to the govt. If you ask me when that happens our SHARE price should be $30. the govt owes that money back to shareholders. and since there is only 1.2 billion shares out, thats our money. aka A TAKING by the federal govt of OUR money.
id like to point out that the govt does not care if you or I make money as shareholders. THIS ALL revolves around bonds that fannie issues. And once they see the light we will be rewarded for holding. they are fine with shareholders making profits. even Warner was a venture capitalist and proud to tell everyone of his 30 to 1 return. this shows they dont mind you and i profiting. as long as fannie is not gonna look for another bailout. this is the direction this goes. Id wager 95%, this is a sure path forward. this will bring 10 to 1 return from here i believe $30 is a shoe in either from the TAKING or from the easy VC warner loves to brag about of 30 to 1. from $1 to $30. simple. 
the guarantee would be the banks putting skin in game upon failure of the bonds. the banks would not want to take first loss on the loans. this would stop this problem. and if they issue properly they will be skin free, since the loans wont go belly up, just as we all know has happened for decades. simple. write it up proper everyone wins. write bad loans and the bank loses first 10% on the loan.
let do a scenario. 100k house 20k down. loan goes belly up. fannie no loss on books till forclosure. JUST LIKE THE BANKS DO IT. then house sells for 65k in foreclosure. so 90k on books bank has to take 10k off bond. this leaves 70k. on books. 65k recieved, this means fannie has to book 5k loss but bank took 10k loss. this would be the new scenario. fannie loses 5k instead of 15k. bank loses 10k instead of NOTHING. see how this is better.? and dont forget the bond buyer loses nothing. as it should be. just as it always has been. and if the bank writes a good loan, the bank loses nothing. this would be a great incentive to write a good loan. and upon any loss Fannie would reduce its losses by 66% and in the scenario of 2008 fannie would of only been down 35 billion but only after the forclosures were final. this could be easily elevated by having fannie keep 60 to 100 billion in cash. cold hard cash. this would take fannie a year or two to put aside. LOOK HOW FAST I FIXED THE WHOLE THING. in 10 min

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