A merger of Fannie and Freddie’s would likely allow for cuts to personnel and overhead, since the two companies have identical and redundant functions. It would also be a major, fundamental change that would allow the administration to claim it was not allowing the two companies to continue as they had before they failed.

They simply re-collateralized those loans with taxpayer funds. It's RTC without the auctions.

Maybe the risk associated with the bullshit loan terms were worth it for some people so they could be given even the slightest opportunity to own their on home. Personally, it doesnt justify those actions but home ownership is a bullshit concept to me anyways...

there's always been predatory lenders since the dawn of money exchanging. these guys are not stupid.
now they can buy back the foreclosed property at a bargain price and package it up for other investors.

it's the same (but on a much smaller scale) as credit card debt, car loans, etc. etc. It's all the stupid people that want to live beyond their means, and the stupid people that allow them to do that and wait to the bubble to burst...

And we all have to pay for that now. Again, I hate stupid people...

there's always been predatory lenders since the dawn of money exchanging. these guys are not stupid.

now they can buy back the foreclosed property at a bargain price and package it up for other investors.

me don't know much bout loans but isn't it the adjustable rate loans that's causing people to not afford the payments? someone explain it in 2-3 pages not the 30-40 pages mortgage contract that's given to these people.

babyhitler - there is a BIG difference between insolvent and illiquid. Fannie and Freddie have plenty of assets but there is uncertainty as to how much those assets are worth.

Also, by "predatory lending" do mean giving loans to people that otherwise couldn't afford it? Like poor people? So are you against poor people getting the opportunity to own their own home? I understand the terms of many loans didn't make much financial sense, but then again, humans often do things that don't make much financial sense (i.e. gambling, buying a car, keeping alot of cash in a non-interest bearing checking account and oh boy could I go on).

Maybe the risk associated with the bullshit loan terms were worth it for some people so they could be given even the slightest opportunity to own their on home. Personally, it doesnt justify those actions but home ownership is a bullshit concept to me anyways...

I'm sure someone else can speak to it better but where these predatory lenders giving "preferential treatment" to minorities in order to make lending look more equal opportunity?

the money exchangers screws us over again.

#4- waitaminute, if they are bankrupt that means they don't have to pay back the money. Isn't the whole point of predatory mortgage lenders to steal money, declare bankruptucy and then run away?

Predatory mortgage lenders are definitely not keeping their money. They're out of business and bankrupt. Get your head out of the sand and learn something about markets and business.

This is emblematic of the technical and fundamental problems the debt markets are facing - technical in very little liquidity (little money flowing, fewer options to finance, institutionally) as a result of the fundamental uncertainty of higher default and severity (when will people stop making payments, and once they do, how much will the left over collateral of the house be worth? will they steal the pipes and pee all over the carpet because they are mad?).

Fannie and Freddie not only 'give mortgages', which they actually don't, they borrow short term funding (fannie / freddie notes) and then take that money to buy mortgages and issue bonds based on mortgages (fannie /freddie MBS).

The agencies both have two main business lines - insurance (guarantee losses on their mortgage bonds) and arbitrage (buy their own MBS and fund them with cheaper Notes - i.e. borrow with 4% notes, buy 6% bonds, pay .75% for swaps to cover interest rate risk, and earn 1.25%).

They are screwed on both ends - funding those Notes is more expensive now, and the bonds they hold and guarantee are performing more poorly so that their capital reserves stand to be outweighed by their losses.

By the way - these losses do not come about right away, except if you try to liquidate everything. We won't really know the REAL realized losses from these until years from now once you actually know what the mortgages do - how they default.

The problem is that the liquidity issue AND the fundamental performance issue are reinforcing, that when loans perform badly, liquidity drops because no one wants to buy the bonds or loans because they are afraid of the performance OR they just can't buy them because they need to hold more capital to account for losses on their already outstanding debt investments.

so basically predatory mortgage lenders get to keep all that money?

Hey government, I want a nice apartment and a sports car. Will you get them for me?!?

This needed to be done and should have been done a long time ago. Take them over and break them up. For two companies to have a 50% stake in the mortgage market is ridiculous as it is dangerous, even if they are backed by the feds. The quasi private-government relationship Freddie and Fannie had with the fed pretty much gave them Carte blanche to dabble in such risky investments, more risky than what most banks would have gotten themselves into even in the best of times.