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Former Fannie Chief Credit Officer Says FHA Is $54 Billion Underwater
In keeping with the warnings presented by Kyle Bass warned that the entire housing bubble is now being ported over to the taxpayer's balance sheet, Edward Pinto, a former chief credit officer for Fannie Mae claims that the Federal Housing Administration will likely require a major taxpayer bailout "in the next 24 to 36 months" as it is likely to incur $56 billion more in losses than it can withstand.
For those that think the NINJA loans are a thing of the past, think again - the Fed is now actively encouraging just those same reckless standards that brought America to the brink:
The FHA program’s volumes have quadrupled since 2006 as private lenders and insurers pulled back amid the U.S. housing slump, Pinto said. The trend has left the agency backing risky loans and exposed to fraud in a “market where prices have yet to stabilize,” he said. The program insures loans with down payments as low as 3.5 percent and has no formal credit-score requirements.
The FHA Commissioner, David Stevens, is keeping to his side of the story, which is that everything is being properly accounted for, and there is no risk in the future of the Administration. Don't expect this story to change until the next time the handout hat startrs getting tossed around legislators. In the meantime, the deterioration in loan standards keeps accelerating:
About 14.4 percent of FHA loans were delinquent as of June 30 and 2.98 percent were already being foreclosed upon, according to the Mortgage Bankers Association. The combined percentage for all mortgages was a record 13.16 percent, according to data from the Washington-based trade group, which said in releasing the figures the share of FHA loans past due is being suppressed by the large amount new debt.
So there you have it: housing bubble 2.0, now openly sponsored by the Administration. The more things change (insert appropriate slogan reference here)...
Mr. Pinto's 94 page testimony and presentations and provided below, which are a must read for those who care to see what a reflating bubble looks like.
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200 years from now some school children will be reading a textbook on all this in their "Rise and Fall of Western Civilization" class and one curious boy will raise his hand and ask "Mrs. Babcock, what the fuck were these people thinking?"
The only difference is in 200 years, we'll be reading and speaking this in Mandarin.
Point taken, in that case the teacher will be Mrs. Chan.
Nonsense. We don't have 200 years. We are at a unique convergence of trends of population, cheap energy availability and environmental issues that are clearly unsustainable. Historically when such an event has happened to a civilization like ours, they have provoked war. The odds of us winning a war against a country 4 times the size of ours are nil, but our leaders aren't bright enough to understand that. When all else fails, it will be war, probably a false flag operation to rally support. When it's over, those who speak Mandarin will wipe out whatever remains of us and install their own civilization in what used to be Chicago, Kansas City and Los Angeles. There will be no us. I'd write more about this, but I'm getting a buy signal.
Sorry - but it is inconceivable that any nation now or within the next several decades will invade our country... I'm not saying its never going to happen, or that our civilization is going anywhere but down... but militarily we are currently overwhelmingly dominant.
Are you a fan of The Princess Bride? "I do not think that word means what you think it means."
Germany thought they were invincible too, and were close until they invaded Russia and we tooled up. Rome never imagined it would be sacked by - gasp! - barbarians! England is now a sidekick to its former little colony! Things change.
It's hard to get any accurate information on China's military, but there could be bad surprises in store for us. It was Chinese radar technology that shot down an F117 in the Balkans in the mid-1990's. There are many reports that they have some really scary cruise missiles. Remember, the Soviet Union beat back Germany not through better technology but through adequate technology and greater numbers. We shouldn't be so cocky.
The first post in this sub-thread is insightful, I think. The near-simultaneous destruction of our economic system, the basis of world commerce, and the acute realization of dwindling oil supplies is a very toxic cocktail.
Exactly how would China invade us? Are they going to stage an amphibious assault on Oregon by launching a flotilla from China? Are they going to invade Canada and sweep down? Mexico and up? Even if their military was at par with ours (which it is FAR from being), we have an immense strategic advantage due to our geography. And don't forget nukes which are game changers... and didn't exist in the 4th century or even last century... I'm sorry, the idea IS "inconceivable".
"It was Chinese radar technology that shot down an F117 in the Balkans in the mid-1990's."
Capitalist lies. It was Russian radar/missile technology that shot down the F117.
It all ends in 2012. Didn't you get the memo?
The markets, the government and Goldman Sux know it. Why not party like it?????
(Tinfoil hats not included with my predictions)
This will especially happen since per month the US is buying more conventional firearms (as a citizenry) than are required to provide a single firearm to each and every member of the Chinese army.
Per month.
Anyone who invades us had better be ready to fight a long bloody war to the death, we're the most heavily armed populace on the planet, desensitized to violence and constantly arming up (moreso now that we're under a "Democrat").
The more things change (insert appropriate slogan reference here)...
I'll bite. "the more we are completely phucked"
FHA WILL implode. It WILL blow up. It is TOAST.
This will happen after the mid term elections though....
"as it is likely to incur $56 billion more in losses than it can withstand." Wait a minute. So there actually is a limit to the losses? $56 billion is somehow worse than $24 billion and $100 billion won't happen? This entity has been bankrupt for some time now and keeps hemorrhaging money. The Fed just keeps buying up the mess and the problem gets kicked down the road for another day.
$54 B...nothing by today's standards.
I'm going to start day trading these stories.
They are so bad that the market has to go up.
10:11 AM S&P at 1062 all in
I move we implement a David Stevens "oops, I've crapped my pants" watch. He apparently doesn't know it yet, but there's a big soiling coming his way in the not too distant future. I sure hope someone has the camera ready...
No good loans. Calculated Risk had a post about Jim the Realtor out of San Diego. Jim has been a long term housing bear, but he says suddenly you can't put a price on a home in the SD area and you get bidders. An example home was one that was price in the $350 range and sold in the $550 range 2 years ago. The house would bring about $170K max here in the DFW area. He said there were bidders for a foreclosure sale on a home that started in the $900's and went above $1 million. You have to have cash or some fast financing to buy at foreclosure. We are clearly a mania II and these are homes well above what would rationally trigger the need for a $8000 tax credit. One thing Jim also said was they were getting appraisals on these bid up prices, which tells me that the appraisers have been ordered to be lenient.
My mention of no good loans is that I believe we are at a point in time where long term forces are going to grind down housing prices. We own 19 of them free and clear and if this mania gets going again in the near term, they are going on the block. In the above case, there is $200K of price pressure hanging above that price and once the recent pop slows down, the insolvency of the loans above are going to start grinding on the area. From what I understand, California is near bankruptcy and losing jobs and population. This isn't a recipe for rising incomes.
I will come back in read what Mr. Pinto wrote. I recall the report put out in early 2002 by OFHEO head Armando Falcon about the solvency problems at FNMA. There are Youtube videos about how the democratic black caucus threw rocks at Mr. Falcon, most likely at the request of FNMA CEO Franklin Raines, who bankrolled a good slice of their re-election campaigns. The Republicans are going to have a field day with this one, though Bush started a lot of this stuff. Obama though is having an orgy with it.
Jims reo auction comment floored me. On the block for $900k and it's bid up $100k, so some are standing around with a $million cash in their pocket. Is that money on the sidelines?
Reading this it sounds like a real clusterfook.
http://www.zerohedge.com/article/guest-post-e-mini-chart-update#comment-...
I too will be a seller of my one measly home if/when the 15K tax credit gets passed.
Read the excellent piece by Laurie Goodman from Amherst, a GREAT housing analyst - she estimates there are 7M homes in delinquency status that will eventually hit the market. That would be in comparison to the 5.4M annual sales run rate for existing homes.
I think she is a bit extreme, I don't think cure rates will be as bad as she thinks, but the number will be high.
The short-term euphoria you are seeing in some housing markets is due largely to the foreclosure moratoriums and the HAMP program keeping REOs off the market. More REOs will hit the market soon - they are being "resolved" (i.e. borrowers being booted out) as we speak, and will hit the market starting this month.
http://www.senseoncents.com/wp-content/uploads/2009/09/Amherst-Mortgage-...
Never again did I think we'd ever hear the term NINJA loans.
And for more insanity, CAR in California projects median home prices to increase 3.3% in 2010. The FHA Fantasy Funding Machine is moving into overdrive I suppose.
Its disgusting the way they keep finding ways to drop their losses on yet another government body and thereby the taxpayers. I'm sure a lot of these new FHA loans are paying off loans to the big banks via refinancing of some kind
Why don't they just come right out and announce that from now on all US citizens will be given just a food and housing allowance and everything else from their salaries and savings will be given directly to those who are already rich?
Based on citizens reactions to all the crap that's come in the last 2 years they'd probably be placated not to riot so long as a cable TV allowance is included
"I'm sure a lot of these new FHA loans are paying off loans to the big banks via refinancing of some kind"
Correct.
Who cares?????? they'll just print more money and plug that hole too. THis doomsaying is pointless
"About 14.4 percent of FHA loans were delinquent as of June 30 and 2.98 percent were already being foreclosed upon, according to the Mortgage Bankers Association."
As of September that number will be well over 15%.
According to Denninger, the total troubled loan ratio for FHA is already 22.9% when counting the 30 day lates.
That's it?
Benny, Larry, Timmy and Barry have assured us that all toxic crap will be purchased by the taxpayer, so no problemo I'm sure they have a plan come 2.10.
Did I mention that the FHA will implode?
TD, please save that head explosion clip from the bianco article yesterday....it will be needed when ZH publishes the FHA's request to congress to bail them out after the mid term elections.
As I watched the houses in my area shoot up in price from $120K to 130K then 140K, I was seriously bummed because I saw it was going to take more savings to buy one. OK, so I bucked down and saved hopping for the next year. Then the houses kept going up. In 2005, some new family condos had excited me, starting at the low 160's the sign said. With about 20K saved, and a full time at $13 per hour, I was close, perhaps early next year. Then I watched over the summer of 05 as the prices went to 170K then 180K then 190K. I was dying inside. I thought, "How can these buyers, people of my income, afford this unless they're gonna devote 50 or 60% of their income to housing costs?" I looked for better paying work but it was all the same. Then the signs changed to $180K then $190K, then -from the low 200s-. By my reasonable 30% income calculations, I was shut out. The signs changed again, -from the 210s-, then 220s, then -from the low 230s-. What the hell was happening? Greenspan on the TV said it was explained by supply and demand but high cost housing was being built all around by cheep Hispanic labor and all the available jobs were under $15 per hour. I kept thinking to myself, "This doesn't make any sense. How can this be?" Then the prices leveled out but way too high for me, at least until after some years of grueling high savings, which I did. Then it all fell apart and now I'm hearing that the high fucking powers are manipulating all they can to keep house prices high and out of reach. The banks must be saved because the banks can't be held to blame. The banks are the chosen, the people are nothing but damn weeds. The people who bought beyond their reach are loosing theirs. I thought they were foolish, but you know, did they have much choice? Everything was beyond their reach. The prices should come down, but no, the prices have to stay high. Oh, the fucking powers are printing money from the thin air and essentially giving it away to the banks. How much are they giving away, oh about the salary of $4-5 per hour for every US citizen. OK, so not only must a simple house stay unaffordable to me, but I'm on the tax hook. The fucking powers will not let banks loose and I've gonna pay for that goddamn unaffordable house that I ain't never gonna get to have. You know, fuck the banks and the cheating powers. If I'm gonna be closed out by the fucking powers, I'm gonna go find me a new bank owned house and burn that fucker to the goddamn ground. Why not. I being made to pay for it. The fucking powers got it backwards. If they gonna burn the simple hard working people then they should expect middle of the night justice. More than you know are with me on this.