Foreclosures Riddle Insolvency Debate on Fannie-Freddie
August 1st, 2008
The nationwide foreclosure riddle has raised questions on the solvency of the nation’s largest mortgage companies Fannie Mae and Freddie Mac. Whether these giant finance agents are sound or not have become a matter of national debate. Wall Street and Washington echoed with the question when the share prices of the two companies dipped again and investors were afraid even to anticipate the worst.
There is no definite answer to the question. Fannie Mae and Freddie Mac seated at the centre of the country’s housing market, deals with every second house mortgage that takes place in the nation. Moreover the size and the complex nature of the companies make it difficult to analyze the extent of its position. Analysts at Wall Street are on a debate as to the amount of losses that the companies are liable to incur when the foreclosure figures are on the rise and prices of houses are on a downward spree in line with the trends of the housing market as a whole and the economic forecasts in general.
Analysts assume that the Federal Government would definitely bail out the shattered firms if they are drowned in losses but it would to do so at the cost of the taxpayers. Thomas H. Stanton who is a teacher at John Hopkins University on Credit Risk is also an expert on the working of the two gigantic mortgage companies but confesses that it is difficult to fathom the extent of damage it might cause, if they were really out. According to Mr. Stanton, the average American had vested their trust in the capabilities of Fannie and Freddie as evaluators of mortgage properties. So the companies operated even with large debts and little back-up finance cushions. The rise in foreclosure figures does no longer credit the company’s goodwill. Distressed borrowers facing foreclosure see no hope of redemption. Owner occupied houses listed under foreclosure are the worst hit, a survey revealed. At the moment, Stanton felt, it was not transparent how and why things have turned out to be as they did as also it was unwise to comment on the discretion of their policies of lending. Wall Street had already witnessed the collapse of Bear Sterns on top of JP Morgan at the end of the first quarter and the Federal Government was formulating plans of a takeover of the titan companies Fannie and Freddie if their hiccups persisted.
- Wells Fargo Wins Auction Bid for Foreclosed Apartment Complex in Harlem
- Moral, Social and Financial Issues Behind Borrower’s Decision to Walk Away From Foreclosures
- Foreclosures are Persisting While Price Slump Too is Continuing
- Foreclosures Somewhat Halted by Loan Modification Programme
- Experts Fail to Reach a Consensus on the Severity of the Foreclosure Crisis in New Jersey
- Foreclosures are Spawning a New Set of Landlords
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