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Fannie/freddie Will Be Privatized

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Non Sequitur

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Elliott

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I don't think we have any precedent of something that big going from GSE (with a stock price) to private.

Here was an interesting comment from the article:

"Bill Johhsona day ago
Do you think private companies will demand an interior inspection be performed by an expert real estate appraiser? Fannie and Freddie's plan (in the next few months / prior to the election) was to eliminate the requirement (via big data / public records) in 20 to 50% of the times."

So if Fannie/Freddie were a private corporation, with no safety net, how wold they underwrite loans? I don't think anyone really knows. What rate risk would a private corporation expect for a 30-year mortgage? Would the rate be acceptable to the consumer? Fannie has a capitalized value of approximately $150 Billion.....but then its capable of going to zero with a 4% default rate, which seems to happen from time to time. With lagging iPhone sales, maybe it would be a good pick up for Apple.
 
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Non Sequitur

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I don't think we have any precedent of something that big going from GSE (with a stock price) to private.
True, it would instantly create the largest private company in the world if not broken up. But even breaking it up the risk is creating several companies that would still be among the largest in the world. I'm not sure how the market would react to that.
 

Eli

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Who will insure it?
 

Fernando

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What's wrong with the system now. Fannie Mae is a form of government subsidizing homeowners. Let's call it what it is. If not for Fannie Mae, many Americans can not afford a home. If privatize, middle class will get hurt in paying more.
 

glenn walker

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It is not going to happen there is NOBODY that wants 30 mortgages at 3% to 4% other than the federal government. Fannie and Freddie have become the governments black hole FUND it and dump because in the real world the interest rate would have to go up by 2%-4% to take the risk : ) LOL
 

TRESinc

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It is not going to happen there is NOBODY that wants 30 mortgages at 3% to 4% other than the federal government. Fannie and Freddie have become the governments black hole FUND it and dump because in the real world the interest rate would have to go up by 2%-4% to take the risk : ) LOL


The government’s original rescue terms were for Fannie and Freddie to pay a stiff dividend on the bailout funds — 10 percent, amounting to $4.7 billion per quarter. Then, however, the Treasury Department was told of the GSEs’ strong recoveries. According to documents recently unsealed, on August 9, 2012, Treasury was told that the GSEs’ prospects were for strong profitability, requiring no further government assistance. Eight days later, Treasury negotiated with the GSEs’ conservator, the Federal Housing Finance Agency (FHFA), for an astounding revision (called “the third amendment”) of policy: Instead of the agreed-upon dividend, and already enjoying a right to 80 percent of the GSEs’ profits, the government would get 100 percent forever, far exceeding the size of the original bailout.

be pretty hard to give up that cash cow...
 

Elliott

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WSJ Opinion 12/2/2016:

A Fannie Mae and Freddie Mac Background Check
Reports of privatizing the government-sponsored mortgage-finance giants are greatly exaggerated.

................
"This makes clear why Fannie and Freddie cannot be privatized and returned to the markets in the form they were before their 2008 insolvency. The fiction that Fannie and Freddie weren’t government-guaranteed has now been exposed. The markets now know for sure that if the two fail again they will be rescued by the government. If there is any honesty in budgetary accounting, their borrowings will have to be treated as government debt and added to the deficit."
 
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