RealtyTrac Opines On The Coming Wave Of GSE Foreclosure Buybacks: "The Final Liability Will Be Enormous"

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Mon, 11/22/2010 - 12:42 | 746608 TheGreatPonzi
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Don't worry. Ben will print a few trillions, and it will be like nothing ever happened.

Mon, 11/22/2010 - 12:45 | 746625 snowball777
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Well let's hope the Bank of Lynching America's cheeks get spread CountryWide on this one.

Mon, 11/22/2010 - 12:48 | 746632 trav7777
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I'm sure the Treasury has booked these FNRE loans as "income"

Mon, 11/22/2010 - 12:51 | 746643 skyr191
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when it rains it pours.... 

Mon, 11/22/2010 - 15:56 | 747294 midtowng
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The numbers are enormous. I don't see how this is resolved without either another TARP or a few TBTF banks going under, or both.

Tue, 11/23/2010 - 01:04 | 748580 RockyRacoon
RockyRacoon's picture

Surely Congress can solve this problem to the satisfaction of everyone -- except the taxpayer.

Mon, 11/22/2010 - 12:56 | 746646 skyr191
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Mon, 11/22/2010 - 12:52 | 746649 TheGreatPonzi
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Talking about real estate, there's an interesting phenomenon to watch right now. Sales have collapsed Y/Y (about 25% nationwide), but prices followed by only half of the drop. Same phenomenon on average listing price VS average sales price. Almost 50% of difference.

There is no buyer, and owners don't seem to be in a rush about selling (or they just don't want to accept the drop).

Mon, 11/22/2010 - 13:00 | 746676 SheepDog-One
SheepDog-One's picture

FED supporting at least $1.2 trillion in MBS purchases.

Mon, 11/22/2010 - 13:32 | 746794 flattrader
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They don't want to accept the drop.

"They" being owners who can still afford their mortagage but want to ditch their house and at least "break even".

"They" being banks who are still desperately trying to hide the shadow inventory.

This is from July of this year-

Lots of listing being pulled off the market (in my area) as we head into the winter months.

That chart above will look so much worse next year.

I don't know how long the can conceal the shadow inventory.  There approximatley 40 mos. going forward as it is.

Mon, 11/22/2010 - 14:02 | 746916 eatthebanksters
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Most seller's can't cut their asking prices to where they need to be to sell they'd be underwater...The majority of the deals that seem to be getting done are distressed transactions, and that's is a bad omen for the future of the means more downward pessure on prices...look at recent solds in the MLS, that always is what tells the story.

Mon, 11/22/2010 - 12:53 | 746652 economessed
economessed's picture

But.....the banks said this was just a clerical error.  Did we stop manufacturing "White-Out?"  Can't we just fix some signatures and get on with the recovery so we can pay bonuses to these geniuses?

Mon, 11/22/2010 - 20:40 | 748150 StychoKiller
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Ya know it's bad when ya have to apply white-out with a spary gun! :>D

Mon, 11/22/2010 - 12:55 | 746655 57-71
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I'm waiting for some enterprising soul to manufacture a series of documents to sue for a billion. And get the award!

Mon, 11/22/2010 - 12:57 | 746668 SwingForce
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Dump REO's ha ha, that's a good one. Regain public confidence?, oh ho, stop it, I'm dyin' over here.

Mon, 11/22/2010 - 12:58 | 746669 dbach
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Seems like a good time to expand the Fed's purchase program to MBS, then they can bury that worthless paper with the negative real return on the tbills they've been snatching up. The Fed's balance sheet can be a kennel where we dump all mistakes.

Mon, 11/22/2010 - 13:14 | 746722 Fidel Sarcastro
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dbach - Isn't that what's happening now?  Then the Fed can buy up all the worthless debt of cities, states & municipalities. Debt?  What's that? Just send it to Benron.


Mon, 11/22/2010 - 13:30 | 746786 dbach
dbach's picture

i meant in terms of QEII, they do have a lot of MBS on the balance sheet already. and yeah muni debt might be next too.

honest question - if the fed loses money, how does that get rectified? ie they buy 'assets' and they turn out to be worthless, is there any way to balance that out? on the t account A=0, liabilities=the money printed, is there equity that gets blown up?

i've been researching around and i haven't found anything clearly discussing the Fed's accounting and structure, if anyone has a resource i'd be interested

Mon, 11/22/2010 - 13:33 | 746797 merehuman
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More Bull  Shit   MBS by any other name..

Mon, 11/22/2010 - 14:34 | 746953 doolittlegeorge
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you appear to be strategizing with Mr's Gross and El-Arian because this would appear to be exactly what they believe in.  "It ain't easy for the Fed to give up that ring of power"  Needless to say "the hundred of billions the Fed has made and believe they will continue to make goes directly into the US treasury and government programs."  In short "there is no private wealth being created here but public largesse instead."  Obviously "public largesse requires large sums of capital to maintain."

Mon, 11/22/2010 - 14:58 | 747090 Captain Kink
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it already is.  the Fed is the "bad bank"

Mon, 11/22/2010 - 13:01 | 746679 Don Levit
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The GSEs are the lowest of 4 levels of government obligations.

They are on the same level as future Social Security benefits, future Medicare Part A benefits, future Medicare Part B benefits, and future Medicare Part D benefits.

The highest level of obligation  -  Publicly held debt, Military and civilian pension and post-retirement health, Veterans benefits, environmental and disposal liabilities, and loan guarantees.

See the paper entitled "Fedearal Debt, Answers to Frequently Asked Qusetions, an Update," published by the GAO.

Go to pages 65 and 66.

Don Levit

Mon, 11/22/2010 - 13:15 | 746730 packman
packman's picture

The GSEs are the lowest of 4 levels of government obligations.

They are on the same level as future Social Security benefits, future Medicare Part A benefits, future Medicare Part B benefits, and future Medicare Part D benefits.

You're talking accounting.  Politics trumps accounting - every time.

Plus don't forget scale.  The scale of SS & Medicare obligations is 10x that of the GSEs.  Bailing out the GSEs costs next to nothing compared with SS & Medicare, thus is a lot more politically expedient.


Mon, 11/22/2010 - 13:01 | 746684 SwingForce
Mon, 11/22/2010 - 13:07 | 746701 SwingForce
Mon, 11/22/2010 - 13:17 | 746724 tahoebumsmith
tahoebumsmith's picture

They are all sleeping in the same bed so nothing will happen. Fannie & Freddie will write them off and put it on the back of the taxpayers just like they do every quarter when they lose billions. It was Obama that said he would give indefinite support to Fannie and Freddie wasn't it? They already got it baked into the cake, this way they can let the CRONIES continue on with their robbery and leave us holding the bag. Kind of the same way AIG funneled all the cash in form of CDS to cover the mortage losses, Fannie and Freddie will be set up the same way, another backdoor bailout!

Mon, 11/22/2010 - 13:24 | 746767 Hondo
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Those entities equity and debt need to be wiped out and haircuts taken.  Absolutely insane that that hasn't been done yet.

Mon, 11/22/2010 - 13:42 | 746837 SheepDog-One
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The whole country and everyone in it being destroyed so a few people dont have to take a haircut for their scheme that has blown up? Preposterous, even a 3rd world banana republics people wouldnt stand for such an outrage! Make them eat their losses, seize all their assets for auction, get it over with!

Mon, 11/22/2010 - 13:26 | 746774 SwingForce
Mon, 11/22/2010 - 13:27 | 746778 Comrade de Chaos
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Just a small correction... "everything seemed so good just two weeks ago."  :)

Mon, 11/22/2010 - 13:36 | 746810 Implicit simplicit
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Come one, come all to the greatest circus show on earth.

Watch terrified as the Us economy balances itself precariously on an illusuinary tripod of RE, banks, and the Fed.

 Below them 14 trillion dollars of debt and growing of fiat currencie quicksand.

Houdini himself would have been awestruck by the ability of the goverment to fool the people for soo long, while they pickpocketed the middle class show attendees.

Mon, 11/22/2010 - 13:37 | 746815 jal
jal's picture


Its not news. You have not been paying attention to the news. Here are some old news items. 


Crisis Leftovers: Fannie, Freddie Force More Mortgage Buybacks


March 6, 2010


Fannie Mae and Freddie Mac are forcing the nation’s biggest lenders to buy back more of the badly-written mortgages that served as a trigger for the financial crisis, and a dash for cash has ensued.


The government-controlled mortgage finance giants Fannie and Freddie could force some of the top lenders – including Bank of America, JPMorgan Chase, Wells Fargo and Citigroup – to buy back $21 billion of home loans this year as part of its housecleaning of souring mortgages.


Fannie Mae and Freddie Mac are among firms seeking to force banks to take back defective mortgages, especially those written during the peak of the housing boom, after defaults helped push the two federally backed firms and some insurers to the brink of collapse.


Fannie and Freddie forced the four largest U.S. banks with buybacks in 2009 amounting to about $5 billion in losses, according to recent company filings.




BofA May Owe $20 Billion in Mortgage Buybacks, Insurers Say 


By Hugh Son - Sep 13, 2010


Mon, 11/22/2010 - 13:39 | 746822 Ned Zeppelin
Ned Zeppelin's picture

Let us all learn more about the fact that "mortgage-backed" securities are really "not backed by mortgages" securities:

Mon, 11/22/2010 - 13:49 | 746864 belogical
belogical's picture

Not that there is anyway to collect, but I have often wondered that if fraud is proven in MBS and loan origination, than anyone who owns a home who had their equity drop as a result, may have cause to blame(legally?) the banks and there by seek damages.

Not a lawyer but I have wondered

Mon, 11/22/2010 - 15:04 | 747111 MachoMan
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No.  Credit is a double edged sword.  Any increases and/or value that the home had was the result of credit.  Any loss was also the result of credit.  In other words, it was the same function that was responsible for the loss and the gain.  As a result, the suing party is left with the legal position that any gain should inure to his benefit while any loss should be born by another party.  Can't eat your cake and have it too.  No one wants to admit the speculative nature of purchasing assets... 

The other issue is privity.  Essentially, the person who is responsible for the run-up in credit (and subsequent run-up in housing prices) is not the same person who sold you your house and made no representations to you regarding the value of your house.  In other words, another way to skin the cat would be to show that the price you purchased the house was inflated and the market conditions presented by greenspan/bennie lead you into a false sense of safety.  The problem is that your own stupidity is not a cause of action.

I also am guessing governmental immunity is going to play an intricate role.  I'm not sure why the banks wouldn't simply invoke sovereign immunity...  hell, they're just arms of the state, either directly through ownership or indirectly through backstops.

Maybe you can get there on a really, really involved civil conspiracy charge.  But, if you can connect all those dots, then we will have already descended into the darkness.

Mon, 11/22/2010 - 13:51 | 746878 carbonmutant
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As long as CNBC doesn't say anything about it we're cool...

Mon, 11/22/2010 - 13:53 | 746885 redpill
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4 million+ foreclosures since 2005, worth $700B.  Wonder how much of that we will all wind up paying.

Mon, 11/22/2010 - 14:20 | 746983 sbenard
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Market to Obama:


Mon, 11/22/2010 - 14:29 | 747003 carbon based unit
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question ... the banks were previously propping their balance sheets' at quarter-end by using the repo market to temporarily mask just how deplorable their holdings were.  this was popularized by the infamous so-called repo-105 transactions at the esteemed LEH.  then they all got called out by zero-hedge and others revealing that all the banks were doing this sort of thing.  does anyone know if this practice has ended?  i'm just wondering if, since they might not be able to get away with the repo-105 charade, whether the loss-reserve draw-down is the replacement gimmick, enacted out of desperation for something to prop up the rationalization for the ongoing bonus scam.

Mon, 11/22/2010 - 14:49 | 747056 doolittlegeorge
doolittlegeorge's picture

damn good question, too.  "If your equity trades are coming all in on the positive side for both you and your firm then clearly you are taking money not just from someone else but from many-else."  From whence come the losses?  Somewhere in your own firm?  The technical term is "internal controls."  We skipped this in 2008 and went directly to "disintermediation"--with the real bad boys "looking to see if there would be a breakdown in the internal controls of the Federal Government itself."  As it was this did not occur and indeed "there suddenly appeared a controlling legal authority" in the form of Hank Paulson et al. and an extraordinary "bailout" (called TARP) for lack of a better term.  Of course "for two years now we've been hosing our economy with free money from the Fed."  This is a POWERFUL prophylactic, no?  Of course as any girl will tell you "prophylactics have there limitations."  Eventually "the economy becomes real" whether good, bad or indifferent.  Needless to say "Europe is attempting this Walk on the Wild Side and not doing it very well."  Indeed "does the EU have any internal controls whatsover?"  Imagine for a moment "being the recipient of that actual MONEY and not mere largesse."

Mon, 11/22/2010 - 16:11 | 747332 tony bonn
tony bonn's picture

looks like another fuck you for the taxpayers....

those god damned terrorists at the gses should be executed - capital punishment - for fraud, terrorism, and inhumanity. they are evil scum.....and then chris dodd and barney frank should executed....i am so sick of those pieces of shit i could run a pitch fork up frank's oversized asshole.

Mon, 11/22/2010 - 16:44 | 747478 Eastwood
Eastwood's picture

Cats and dogs, living together. Mass hysteria.  The problem with predicting the end of the world is that you'll have no one on the other side of the trade to collect from when you're right.

Mon, 11/22/2010 - 17:34 | 747688 MachoMan
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"yeah, but you just trade the change in prices before collapse" - eye roll-

Mon, 11/22/2010 - 18:37 | 747891 MachoMan
MachoMan's picture

double the pleasure, double the fun

Mon, 11/22/2010 - 17:53 | 747751 Djirk
Djirk's picture

Stop worrying, Obama can pay that off with the profits he made from the bank bailouts and the "investment" in GM....cough cough

Mon, 11/22/2010 - 22:52 | 748381 sasebo
sasebo's picture

Makes me think of my old grandpaw back in Mississippi in the 30's & 40's plowing his corn field with a mule. Some one asked grandpaw one day what was the hardest part of plowing with a mule. Grandpaw said, "getting it's attention" They then asked, "well grandpaw how do you get a mule's attention?" Grandpaw replied, "that's easy, you just hit it in the head with a two-by-four."

We just haven't gotten the attention of the fat cats running the banks & government. I can assure you one day we will. And just like hitting a mule in the head with a two-by-four, it won't be pretty.


Tue, 11/23/2010 - 13:25 | 749748 jmc8888
jmc8888's picture

Actually it's 0 liability after Glass/Steagall

The question is, how do the Banks balance sheets look after it's zeroed?

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