Tuesday, December 11, 2007

Freddie Mac leaking money, pushes back on lenders

The latest home-finance bad news, as well as the answer proposed for it, are certain to add weight to the housing bubble anchor.

Freddie Mac expects to lose an additional $5.5-$7.5 billion over the next few years, beyond the $4.5 billion it’s already lost this year.

"I honestly think it's going to get tougher before it gets better," Richard Syron, the company's chairman and CEO, said in a discussion with financial analysts in New York.

Hello, presidential candidates, are you listening?

Meanwhile, Freddie Mac is protecting its own bottom line:
Syron's remarks came a day after Freddie Mac and its larger government-sponsored rival Fannie Mae said they are changing their criteria for purchasing delinquent home loans they've guaranteed, in order to reduce the number they buy from investors.

On Tuesday, McLean, Va.-based Freddie Mac announced it was imposing a 0.25 percent fee on all new home loans it buys or guarantees with settlement dates starting March 9, matching an earlier move by Fannie Mae. Both companies have begun adding surcharges on loans to borrowers with credit scores below 680 and who are borrowing more than 70 percent of the home's value.

This can only push the price of new loans up further, while making banks and other lending institutions even more nervous about iffy loans they have on the books dating from March 9 to the present.

We’re going to see more and more financial CYA like this in the coming six months or so. Financial bulls who claim housing market recovery is “just around the corner” are full of it.