Fannie Mae Failure

The mortgage crisis of 2007 marked catastrophe for millions of homeowners who suffered from foreclosure and short sales. Most of the problems involving the foreclosing of families’ homes could boil down to risky borrowing and lending. Lenders were pushed to ensure families would be eligible for a loan, when in previous years the same families would have been deemed too high-risk to obtain any kind of loan. With the increase in high-risk families obtaining loans, there was a huge increase in home buyers and subsequently a rapid increase in home prices. As a result, prices peaked and then began falling just as fast as they rose. Soon after families began to default on their mortgages forcing them either into foreclosure or short sales. Who was to blame for the risky lending and borrowing that caused the mortgage meltdown? Many might blame the company Fannie Mae and Freddie Mac, but in reality the entire system of buying and selling and free market failed home owners and the housing economy.

The Federal Government needs to make sure to enforce strict guidelines on who can and cannot be accepted for a home loan, and not allow big investors to borrow excessive money at low interest rates to inflate the investor’s financial advantage. If the government starts allowing lower standards on mortgages, we are going to end up in the same catastrophe once again. In an article written by U.S. News and World Reports entitled Should the Federal Government Provide Support to the Mortgage Market?, the Federal government and the President attempted to get involved with the housing market. The passage implicated that Obama wanted to do away with federally funded conglomerates Fannie Mae and Freddie Mac and implement another type of government assisted program ("Should the Federal Government"). The program would prevent the mistakes made by Fannie and Freddie which created the original “housing bubble burst” ("Should the Federal Government"). One of the Senate bills suggests the government create “a new agency, the Federal Mortgage Insurance Corporation to replace Fannie and Freddie” ("Should the Federal

The Divide by Matt Taibbi In The Divide, it covers the major differences between the very high wealthy and the lower class. HSBC is the first thing that the book starts discussing. The company admitted to stealing around seven billion dollars.

In the years of 2007-2008, the world economy faced the most severe global financial crisis. The collapse of the sub-prime mortgage market was considered to be the trigger for the Global Financial Crisis. In the United States, low interest rates and financial deregulation created credit conditions where it was easier for the American people to buy homes with subprime loans. It increased the housing demand and raised the house prices in the market, which resulted in a housing bubble. Fannie Mae and Freddie Mac are two private corporations that are referred to as government-sponsored enterprises. They offered a mass of mortgage-backed securities (MBS) to the high-risk borrowers. Rising house prices created home equity for the borrowers, allowing

Securitization history can be traced back to 18th century, but the first examples of mortgage-backed securities can be found in 19th century in United States, that are the farm railroad mortgage bonds of the 1860s. After the Great Depression, the government took several initiatives to increase the supply of funds for mortgages loans. Their aim was to support the primary market first, and then the secondary market. In 1934, the Housing Act was enacted and FHA (the Federal Housing Administration) is created by the U.S. federal government. The FHA developed the fixed-rate mortgage, which is an alternative of balloon payment mortgage. In 1938, the federal government also created Fannie Mae, a government-sponsored corporation, in order to create a liquid secondary market of mortgages.

Created by Congress, Fannie and Freddie -- called G.S.E.'s, for government-sponsored entities -- bought trillions of dollars' worth of mortgages to hold or sell to investors as guaranteed securities. The companies were also Washington powerhouses, stuffing lawmakers' campaign coffers and hiring bare-knuckled lobbyists.

During the great depression in 1934 many people didn’t have jobs. Not having jobs meant that it would be awfully hard for them to obtain a loan from banks in order to purchase homes. The government decided to help the American people by creating the Federal Housing Administration (FHA) which basically stepped in and allowed banks to offer mortgages to more people with the promise that the banks would get their money back. The FHA finances itself with insurance premiums that they charge borrowers as well as interest that they receive on reserves. They use these funds to underwrite more loans which helps out people with their mortgages.

The two-story home had the "New" logo stating that the Fannie Mae approved repair contractors had performed certain repairs. The agent provided several clear bright images and a text into the listing. A few of the images showed only partial and corner views of the rooms.

Throughout the conversation, Colby never mentioned that the home was in First Look and that Fannie Mae would not accept offers from investors during this period. Colby provided limited information about the home and did not mention the neighborhood or the surrounding area. When asked, Colby paused to reference the property file and informed me that it needed work, which included carpet, paint, kitchen appliances, and ceiling work. I asked, "Are there other offers?" He paused to reference the property file and then informed me that there was not. I asked, "Is the power on?" He paused and then informed me that it was. Colby answered my questions about the home clearly.

The two -story home had the Incentive offer available stating that Fannie Mae was offering an incentive for selling agents whose buyers purchased and closed on a selected HomePath property. The agent provided images and a text into the listing.

I left you a voice mail asking to use you as a reference. I’m interviewing for a Process Improvement position later this week. Would you be willing to speak on our time at Fannie Mae? Here are some of things you might want to highlight:

The dolors in this situation were the mortgage bankers/companies, the people borrowing money who defaulted, the United States government, and the tax payers in the United States. The mortgage bankers/companies benefited from this for a while, but also lost when people defaulted on loans and house prices dropped. The people borrowing money who defaulted are dolors because they ended up losing their homes and ruining their credit. The United States government and tax payers are dolors because when financial institutions went under and bail-outs were given that money came from the government, which in turn came from the taxpayers.

In 2008 two government sponsored enterprise (GSE), Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), received the second-largest bailout in the United States, totaling $187 billion. The bailout of Fannie Mae and Freddie Mac drew attention to the problems with "too big to fail" (TBTF) entities and government guarantees. The bailout highlighted the lack of market discipline and encouraged moral hazard.

I recognize there are certain situations where the government should contribute financial assistance in preventing massive companies from failing, because some companies provide economic stability and are too important to fail. However, an accurate determination of the national economic damages that a corporation’s bankruptcy may produce should be imperative in justifying whether a bailout is legitimate. An extensive corporation’s bankruptcy may have conflicting impacts on the economy such as; an increase in national unemployment rates, reduction of gross national profits and gross domestic products output. These plus countless other factors overtime could possibly influence a weakening in our economic system trickling down to the value of

One of the main problems that Fannie Mae faced during the financial crisis was the dramatic drop of their stock prices. An article published by CNN during the financial crisis said, “Shares of mortgage financing giants Fannie Mae and Freddie Mac both plummeted Monday after an analyst with Lehman Brothers wrote in a report that the two companies may need to raise billions of dollars if accounting rules are changed” (www.money.cnn.com). In 2007, Fannie Mae’s stock prices were at the lowest level they had seen in