Fannie Mae and Freddie Mac are the two largest insurers and underwriters of residential loans in the US. In the wake of the mortgage meltdown, the Federal Government (that means you and me), pumped $400 billion into these institutions to prevent them from going bankrupt. Now the reason they were (and are) in such trouble is the mortgage brokers and lenders from whom they were purchasing loans were committing gross fraud and misrepresentation on the loans Fannie and Freddie were taking responsibility.
Fannie and Freddie Will Continue to Take Huge Losses
The portfolio of loans held by Fannie and Freddie are huge, totaling $1.6 trillion and the $400 billion pumped in is a security blanket to cover losses if borrowers continue to default on the loans. Unless major changes are made in the systems used to consider and process loan modifications and if something is not done to improve the unemployment situation in the US, borrowers will continue to default, Fannie and Freddie will continue to take huge losses and the US taxpayers will continue to bear the burden for all this. Based on my first hand experience with homeowners facing impossibility of getting modifications, shorts sales or deed in lieu of foreclosure, I predict we will continue to see massive losses in the residential mortgage market.
Give the Bankers Billion Dollar Bonuses!
These same institutions benefitted enormously from the bailout in the form of preferred loans and financial incentive and now they’re making record profits and want to pay their executives more in the year after the crisis than they made during the crisis. Maybe the companies and their executives are entitled to such incredible bonuses. After all, they were able to shift much of their losses and bad loans onto Fannie and Freddie, then march ahead to profitablity….that’s damn good work. Problem is you and me, the taxpayers and consumers, continue to pay for all this while the fat cats laugh all the way to their well-capitalized banks.
The Second Inning of This Ball Game
No one is really sure just how long this mortgage meltdown ballgame will last, but it seems nowhere near the end and shows no signs of letting up. Foreclosure filings are up all around the country, and Pinellas County posted 1500 November 1, December 1, 2009. Until something is done to inject common sense solutions into the crisis and better systems are put in place to address problems faced by homeowners, the problems will only continue and get much worse.
Don’t go it alone. If you’re in trouble with your mortgage or need advice contact Matt Weidner at www.mattweidnerlaw.com