Are Fannie Mae And Freddie Mac REALLY Profitable? Freddie Mortgage Rate Rises to 4.58%

Confounded Interest ^ | 08/22/2013 | Anthony B. Sanders

[whitedog57]

Since I will be chatting about housing finance reform (re: what to do with Fannie Mae and Freddie Mac), I am preparing a presentation that I will be posting next Wednesday.

Chris Whalen has an interesting blog at Zero Hedge entitled: “Are Fannie Mae and Freddie Mac Really Profitable? Really?” His takeaway:

“Given the above analysis, a strong case can still be made that FNM and Freddie Mac ought to be moved to receivership and liquidated. This process would extinguish the supposed claims by “investors” like John Paulson and move the assets of the GSEs into private hands as quickly as possible. But that would be the good news. A prompt resolution of both enterprises would generate growth, income and jobs – something nobody in Washington understands. But we ought to ask, perhaps in a future rant, just why the FHFA IG office decided to make a fuss now, no doubt at the instigation of the US Treasury and Obama White House.”

Ouch.

One of the mantras of pro Fannie and Freddie advocates like Jason Gold at the Progressive Policy Institute is that Fannie and Freddie are SO profitable that we shouldn’t rock the housing boat. Then a former Freddie Mac Chief Economist told me that Fannie and Freddie are only profitable because of accounting tricks, so we shouldn’t rock the housing boat.

Sigh.

Then we have story from Kate Berry at the American Banker entitled: “Fannie Threatened to Block B of A Asset Sales to Settle Mortgage Battle.” In the article, she states:

“Fannie Mae was able to extract an $11.6 billion mortgage-repurchase settlement from Bank of America (BAC) this year — its largest to date — because the bank needed Fannie’s approval to sell billions of dollars in servicing rights.“

Apparently, Fannie Mae made offer that Bank of America can’t refuse.

brando

Fannie Mae is more profitable after extracting $11.6 billion from Bank of America. And this is on top of the massive $51 billion in consumer relief (aka, wealth transfer) on the top 5 banks.

Aug. 22 (Bloomberg) — 30-yr fixed mortgage rate averaged 4.58% in week ended, up from 4.40% in prior week, Freddie Mac said in statement. The 15-yr fixed mortgage rate averaged 3.60% for week.

Here is a chart of Freddie’s 30 year commitment rate (white) plotted against the US Treasury 10 year yield. The red box highlights changes since the May 1st sovereign yield massacre.

freddie30t30y

Further increases in the 10 year Treasury yield won’t help the crashing mortgage refi applications index,

mbarefirates

Or the declining mortgage purchase applications either.

mbapurchasefreddierate

No wonder the large banks are laying off employees in their mortgage production groups.

And don’t forget the Consumer Financial Protection Bureau’s list of mortgage commandments. Better known as “76 Thousand Regulations, Handcuffing Lenders.” With Elizabeth Warren and Richard Cordray in the Robert Preston role in “The Music Man.”

warrencorday

[whitedog57]

Fannie and Freddie must go!!!!!