Items of Interest:
Freddie: Much Worse Than Expected -- Bottom line, the second quarter was rough on ailing mortgage finance giant Freddie Mac (FRE: 6.49 -19.28%); and that’s not considering the drubbing the company’s shares have already absorbed in equity markets during the past month. The GSE said Wednesday morning that it lost $821 million, or $1.63 per share, during the second quarter; a total that compares to net income of $729 million, or $0.96 per diluted common share, one year earlier, and a loss of $151 million, or $0.66 per share, in Q1.
The huge quarterly loss nearly tripled most analysts’ loss estimates, and is the company’s fifth such loss in the past six quarters. The GSE was forced to slash its dividend to 5 cents (or less) from a previous 25 cents per share — the second such dividend cut in the past year.
Clearly driving the continued losses at Freddie are soaring credit costs tied to bad mortgages: credit costs rose to $2.8 billion, double first quarter’s $1.4 billion, with the GSE citing deteriorating performance in the 2006 and 2007 vintages. The GSE also absorbed write-downs on available-for-sale mortgage securities totaling roughly $1 billion, mostly tied to subprime and Alt-A RMBS positions that have seen their investment-grade ratings slashed in recent months...
Inside Freddie Mac with CEO Richard Syron - CNBC video
The Misery Mounts at Freddie Mac - BusinessWeek
Freddie’s Forecast Seems A Little Too Bright - Realty Check
Freddie warns it may dilute existing shareholders - Mortgage Implode
Pimco's Gross Says U.S. Will Rescue Fannie, Freddie -- Bill Gross, who manages the world's biggest bond fund, said the U.S. Treasury will probably be forced to buy as much as $30 billion of preferred shares in both Fannie Mae and Freddie Mac to help shore up their capital.
"By the end of the third quarter, the preferred stock in Fannie and Freddie will be issued, the Treasury will have bought it," Gross, co-chief investment officer at Pacific Investment Management Co., said today in an interview on Bloomberg Television. "We'll be on our way toward a joint Treasury-agency combination." ...
Mish / Trend Analysis:
Fannie, Freddie Reality Check: The Big Bailout Is Coming - My Translation: When Gross says "Treasury" he really means "U.S. Taxpayers"...
Freddie Mac's Second Quarter 2008 Results...
Freddie has $130 billion in subprime and Alt-A loans. Somehow CEO Richard Syron wants us to believe the problem will go away if left on its own...
Treasury Department Hiring “Dumb” To Advise “Dumber” -- You just can’t make this stuff up...
WASHINGTON (AP) — The Treasury Department said Tuesday it had hired investment firm Morgan Stanley to help the government assess the risks facing mortgage giants Fannie Mae and Freddie Mac.Hire Morgan Stanley to assess the state of the mortgage market? Remember this nugget of wisdom from Morgan Stanley last April?
For $95,000 to cover the company’s expenses, Morgan Stanley will assess the state of the mortgage market and give the government a financial profile of the two firms. The two mortgage firms received a promise of support from the federal government as part of a sweeping housing rescue bill passed by Congress and signed into law by President Bush last week.
Treasury spokeswoman Brookly McLaughlin said the contract would help ensure the Treasury Department had good advice to decide how to support the two mortgage firms, which together own or guarantee half of all U.S. mortgages.
Morgan Stanley CEO John Mack told investors that the collapse of the subprime market in the United States has reached its eighth inning or maybe the "top of the ninth."...
The Big Picture:
Mortgage Delinquencies: 2007 Worse Than 2006 -- To all those recent bottom callers in Housing or Financials, here is yet another data point that reveals these two sectors are actually getting worse, not improving. (Why does it seem that so many posts begin that way?)
"Mortgages issued in the first half of 2007 are going bad at a pace that far outstrips the 2006 vintage, suggesting that the blow to the financial system from U.S. housing woes will be deeper than many people earlier estimated.
An analysis prepared for The Wall Street Journal by the Federal Deposit Insurance Corp. shows that 0.91% of prime mortgages from 2007 were seriously delinquent after 12 months, meaning they were in foreclosure or at least 90 days past due. The equivalent figure after 12 months was just 0.33% for 2006 prime mortgages...
Mortgage Failure Rate Rises - Wall Street Journal
Mortgage applications rise 2.8% -- Mortgage Banker's Association's application index rose to 432.6 last week, but remains far below peak of 1,856.7 in 2003.
Mortgage application volume rose 2.8% during the week ending Aug. 1, according to the Mortgage Bankers Association's weekly application survey.
The MBA's application index rose to 432.6 from 420.8 a week earlier, which was the lowest reading of the year.
Refinance volume increased 4.4%, while purchase volume grew 1.8% during the week. Refinance applications accounted for 35.9% of all applications during the week, compared with 35.2% during the previous week...
Commercial Rental Rates Plummet in Manhattan -- The slowdown in the real estate market is finally hitting New York office space ... Asking rent declined 2.2%, to $69.29 a square foot, while Class A rents plummeted 4.4%, to $90.65, according to Studley's second-quarter market report ...
Meanwhile, the availability rate jumped half of a percentage point, to 8.2% — nearly a full percentage point higher than a year ago. ... the supply of sublet space is increasing, up 34% versus the prior quarter, to 8.3 million square feet...
- 40 percent of Ind. mortgage brokers lose license - BusinessWeek
- 8 Who Saw Credit Crisis Coming... and 8 Who Didn't- Fortune
- U.S. Speeding Toward Fiscal Cataclysm - Jeff Jacoby, Boston Globe
- Why Big Mortgage Losses Are Here To Stay - Felix Salmon, Mkt Movers
- Commercial Banks, River Banks and Moral Hazard - Jeff Frankel
- Anonymous Sources & Freddie Mac : Charles Duhigg vs. Calculated Risk
- Amer Express President.: Econ Downturn Not A 'Subprime' Phenomenon - CNN Money