Response to Financial Services Committee and the Federal Reserve


Full Discussion

First, let's start with the fact that the memos presented by Mr. Hensarling (FinancialCmte) originated by the Koch family funded, long debunked statistics, from Mercatus & AEI, inc. employees, Peter Wallison and Edward Pinto. This data has been called out many times. But since they asked for what Fannie and Freddie have done for Americans, here is the business:

Here are some of the recent benefits (all available from FannieMaeProgress.com and their own reports):
 
  • $100M from Help The Homeless, the largest non-profit organization for homelessness in the world
  • $95.0B paid to taxpayers, since 08 including 10% interest
  • 2.9M home loan purchases since 2009
  • 10.6M mortgage refinancings
  • 1.8M units of rental housing finance
  • 1 million home retention solutions
  • More than 280,000 foreclosure alternatives
  • $82 in HARP refinancing savings per week for every family
  • 1.3M foreclosure preventions, and 922,000 loan modifications
  • Borrowers average monthly payments reduced by $246 in the first quarter of 2013 alone
More:
  • Enabled the mortgage markets to stay in business following the crash of the private label markets
  • Provided stability in the markets by providing the best loan performance of any segment of the market
    • For example Fannie and Freddie credit losses were $210B on $5.3T in mortgages, in comparison to private label securitization (the big [private] banks), which lost $714B on $2.2T. Hence, CDOs caused a meltdown.

FREDDIE MAC

  • Freddie Mac's benefits begin with liquidity – $1.9 trillion in funding for the combined single-family and apartment markets since the start of 2009. Freddie Mac and Fannie Mae provided roughly 70 percent of the residential market's liquidity in the first quarter of this year, and even more in earlier years after the crisis. Experts across the political spectrum have noted that without support from the two GSEs throughout this period, the damage to housing and the broader economy would have been worse by many billions of dollars.
  • All this liquidity helps keep costs low and saves consumers money. Since the beginning of 2009, Freddie Mac bought or guaranteed nearly $1.4 trillion of refinance mortgages, helping more than 6.6 million homeowners. And for the Freddie Mac loans refinanced in the first quarter of this year alone, homeowners will save roughly $2.1 billion in interest payments over just the first 12 months of their refi.
  • Freddie Mac's foreclosure avoidance efforts also carry huge benefits. Since the start of 2009, the company has helped more than 830,000 families avoid foreclosure. The value of saving that many homes from foreclosure reaches as high as $36 billion (an estimate that includes losses to borrowers and Freddie Mac, and the deadweight losses of foreclosures to the economy as a whole).

There are plenty of other examples of the same essential point. If not for the steady, vital work of Freddie Mac and Fannie Mae since the crisis, the damage to the housing market and U.S. economy would have been far worse. And the housing recovery might still be a hope, instead of a reality.

The bailout funds are being fully repaid, and the bailout was not bigger than AIG's bailout.
In addition, Treasury originally overstated Fannie and Freddie potential losses by over $100 billion in 2008, and between 2008 and 2012, the Companies’ actual realized loan losses were far less—around $100 billion less—than their anticipated losses, which underscores the magnitude of the Treasury's accounting errors in estimating Fannie Mae's necessity for a bailout.


A most recent discovery by regulators shows that Banks were preventing HARP refinancing provided by Fannie and Freddie -- financing that was only necessary because of the magnitude of fraud by private banks and loan originators (see lawsuit.) For example, 17 banks were sued for originating fraudulent loans for marking the loans AAA, and selling them to Fannie and Freddie as though the loans represented low risk investments. $12B was settled so far, leaving roughly $180B remaining, in favor of Fannie and Freddie. Anyone would need a bailout after that size of fraud. Fannie and Freddie made the largest dividend (that's profit only) payment to American taxpayers in global history.

Let's look at some of the private lenders you would like to turn this company over to:



Here are more stats on Fannie Mae:


As victims, Fannie Mae and Freddie Mac have sustained significant losses, which to date have been borne by taxpayers.  This lawsuit sends the clear message that reckless lending practices will not be tolerated.”

Steve A. Linick, FHFA Inspector General


"Lets remind ourselves, this began with predatory lenders out there marketing products that borrowers could not afford. Fannie and Freddie were never bottom feeders. They had some Alt-A, they had some subprime, but nothing to the extent these other institutions had. That's where the problem lay."

Chris Dodd, former Senator from Connecticut


In 2012, more than 2,000 Fannie Mae employees volunteered approximately 24,000 hours on a wide range of projects and initiatives to benefit 261 local community organizations.

Why should taxpayers care about returning Fannie and Freddie to the markets, and how do they stand to benefit?

"If Fannie and Freddie ever return to private ownership, the government has rights to 80% of the companies' common stock." -- Mr. Olson, a former U.S. solicitor general.

In other words, the government and taxpayers would reap over $200B in profit from the original deal. I encourage you to read more of our Blog to educate yourself, and review the numerous class action lawsuits in the About section.

Here is a responsible bill that we think makes sense for taxpayers, shareholders, and all Americans:
LET GSEs PAY US BACK ACT OF 2013 H.R 2435: Become a Cosponsor Here: https://t.co/Chu3Mz20Et

 


UPDATED: 7/23/13@10:45pm fixed data magnitudes and refactored text

 

 

 


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