Saturday, November 06, 2010

Who D'Ya Know Wants to Buy a House?

Congratulations!! You're one of the country's largest landlords!!

This graph shows the REO inventory for Fannie, Freddie and FHA through Q3 2010.

The REO inventory for the "Fs" has increased sharply over the last year, from 153,007 at the end of Q3 2009 to a record 293,171 at the end of Q3 2010.

There are new records for Fannie, Freddie, and FHA REO inventory individually too.

If Fan/Fred/FHA would stuff those houses back to the loan-originator banks and brokers, there would be a helluvalotta bank failures next week.

Citi, anyone??

HT: CalcRisk

5 comments:

Deekaman said...

This is exactly why banks, mortgage companies and Wall Street need to be accountable, not the taxpayer. If they knew they were working without a net, they would never make the loan. Government intervention has aided and abetted a boom/bust cycle over the last 50 years, not mitigated it. Government exists to keep the bad guys at bay, not bail them out.

J. Strupp said...

"Government intervention has aided and abetted a boom/bust cycle over the last 50 years, not mitigated it."

I'd love to know how you draw this conclusion.

The financial sector was relatively quiet from the early 1940's to the mid 1980's. In fact, I don't recall any "boom/bust" cycles in that 40+ year time period (you might make the case for the oil shocks of the 70's but I wouldn't call that Wall Street induced). Recessions yes. Booms/busts no.

Then came financial deregulation in the 1980's. And what has happened? The S&L crisis, the stock market bubble, the real estate bubble and now a massive bust to follow all in about a 20 year time period.

Sorry, I don't buy your assertion for a minute. Lack of government regulation is the problem here.

Deekaman said...

You won't understand this Sstruppster, but by taking the risk out of financial decisions (which is what Freddie and Fannie do with the mortgage business), you allow people and institutions to take risks they would not otherwise take. The when you FORCE them to make loans by threatening them with legal action, as the Clinton administration did, the will gladly take those risks because the taxpayer is picking up the tab. They are no longer risk-averse and nothing has been done to force them to be risk averse. Consequence? Everyone can buy a house until they can't make the payments. Then the taxpayer bails out the bank...and Wall Street.

J. Strupp said...

Thanks Deekaman. Apparently it takes you 500 words to do something I can do in two.

Moral Hazard.

Deekaman said...

You didn't seem to understand in fewer words. Should I have made them smaller?