Post by bob on May 5, 2013 14:17:39 GMT -5
The government is doing it again. They never learn.
Bob Marks
The seeds of the next housing crisis are being sown this spring, according to a former chief credit officer at Fannie Mae.
Despite the green shoots reported by the Case-Shiller index last week that home prices rose a blistering 9.3 percent in February from 12 months ago, Edward Pinto, a former executive at the government-backed mortgage business, says another crash can’t be too far behind.
Pinto faults Uncle Sam’s housing policy of guaranteeing 90 percent of new loans in the gigantic $6 trillion market through Fannie Mae.
He goes on to say the feds are providing billions in fat trading profits to Wall Street banks and artificially — but temporarily — propping up housing prices.
Sooner or later, he says, economic reality will catch up with this fairy-tale market, which will lead to another depressing housing collapse...
In the meantime, Wall Street powerhouses reap their windfall gains, trading these complex mortgage-backed securities.
The Street makes out like a bandit. In this game, banks accumulate nickels and dimes on each side of the trade, profiting on shifting interest rates, mortgage prepayments and other variables — but not on the “real” value of the underlying mortgages.
“The Street makes millions and millions of dollars on these securities,” Pinto told The Post.
“That’s the dirty little secret. The government guarantees repayment of principal and interest payments on a timely basis, regardless of what the borrower does on an individual mortgage level.”
www.nypost.com/p/news/business/next_home_crisis_lJoi2HNNojY2NGeDei8MsL
Despite the green shoots reported by the Case-Shiller index last week that home prices rose a blistering 9.3 percent in February from 12 months ago, Edward Pinto, a former executive at the government-backed mortgage business, says another crash can’t be too far behind.
Pinto faults Uncle Sam’s housing policy of guaranteeing 90 percent of new loans in the gigantic $6 trillion market through Fannie Mae.
He goes on to say the feds are providing billions in fat trading profits to Wall Street banks and artificially — but temporarily — propping up housing prices.
Sooner or later, he says, economic reality will catch up with this fairy-tale market, which will lead to another depressing housing collapse...
In the meantime, Wall Street powerhouses reap their windfall gains, trading these complex mortgage-backed securities.
The Street makes out like a bandit. In this game, banks accumulate nickels and dimes on each side of the trade, profiting on shifting interest rates, mortgage prepayments and other variables — but not on the “real” value of the underlying mortgages.
“The Street makes millions and millions of dollars on these securities,” Pinto told The Post.
“That’s the dirty little secret. The government guarantees repayment of principal and interest payments on a timely basis, regardless of what the borrower does on an individual mortgage level.”
www.nypost.com/p/news/business/next_home_crisis_lJoi2HNNojY2NGeDei8MsL
Bob Marks
