More on Mega Bulk Sales

Yesterday, FHFA announced the long awaited first Mega Bulk Sales of REO properties in the hardest hit areas – see this press release (pdf)

I can summarize the program for you: mega stupid.

 
 
 
I know there are probably some of you who would say, "if you are so damn smart, why don't you come up wi

th an idea?"  To those, here is what I offer:  just reduce the price of all the properties on the list by 20% and watch them fly off the shelves. By the way, a 20% discount is probably unnecessary and the resulting price would be in any event much much more than what FHFA can possibly expect from a bulk buyer.

I know there are some of you who demand more details, so here is a little more detail.

These are the properties:

 

 

 


 

Summary of properties sold in bulk sale – click table for better resolution.

 


 

As you can see, the bulk consists of 2,490 properties spread over six states. Within the states, it is further divided into areas such as Los Angeles/Riverside, or West, South, Central Florida. Using the Fannie Mae website, you can search the cities/counties and have an idea what these properties look like.  How do you expect the buyers to have efficiency of scale with this hodgepodge of junk scattered all over the country?

The agencies reportedly have over 200,000 REOs, not counting those stuck in the robo-signing black hole. This bulk sale above is a whopping 1.2% of the total inventory. Repeat this exercise 100 times and problem solved, right?

As for value, the entire bulk sale is probably worth less than $100 million, which really does not even qualify as a "bulk" in today's financial terms.  As rentals, only the inexperienced would confuse these assets with a more conventional rental, like an apartment building.  Please check out my previous post on the topic for details (Mega Bulk Sales, A Lose-Lose Proposition?).  These properties are simply not suitable for a bulk buyer.

There's more. What would a government be if there were no red tape. Take a look at the pre-qualification package (pdf) for bidders.

It makes one wonder if they really want to sell REOs or just create some jobs for bureaucrats.

As I concluded in my previous post on the mega bulk sales idea:

 

“In conclusion, any mega bulk sales by the GSEs would certainly be a big loss for taxpayers.  If the mega bulk buyers think they are going to rip off the country the same way their predecessors did during the RTC giveaway, they may be in for a big surprise.  They may eventually find themselves holding cans of worms all over the most undesirable markets.

As for the real estate market, I have no idea what mega bulk sales will do to the already depressed metro areas. They could prove to be very destabilizing. Maybe they will turn out to be the last straw that breaks the camel's back.“

 

I think I am going to end this rant with an apposite song:

 


 

 


 

Addendum: A Little Follow-Up

 

Fannie Mae Acquired 47,256 Single-family Real-estate Owned Properties, Primarily Through Foreclosure, In 4Q

Last update: 2/29/2012 9:09:50 AM (MORE TO FOLLOW) Dow Jones Newswires (212-416-2400) February 29, 2012 09:09 ET (14:09 GMT)

 

So the mega bulk sale is for 2500 properties.  At this pace, it will take 19 mega bulk sales to get rid of one quarter of REOs.

In the meantime, Reuters reports:

 

“Fannie Mae Will Request $ 4.571B Of Funds From Treasury”

Fannie Mae (FNMA.OB), the biggest source of money for U.S. home loans, said on Wednesday it would seek $4.6 billion in additional federal aid after reporting a fourth-quarter loss.

Earlier on Wednesday, the government-controlled mortgage finance company posted a loss of $2.4 billion for the quarter ended December 31. That pushed Fannie Mae's loss for 2011 to $16.9 billion from $14.0 billion a year earlier, the company said.

Fannie Mae's pre-2009 book of soured loans and declining home prices continue to make it difficult for the company to turn a profit.

"We think that we have reserved for and recognized substantially all of the credit losses associated with the legacy book," Chief Financial Officer Susan McFarland said in an interview.

The government seized Fannie Mae and Freddie Mac, which together back roughly half of all outstanding U.S. mortgages, in September 2008 as losses from failing home loans threatened the agencies' solvency.

Fannie Mae has borrowed more than $116 billion from the government and paid almost $20 billion in the form of dividends. [that makes a lot of sense, ed.]

"We're very focused on returning to profitability so we don't have to draw (from Treasury) to cover operating losses," said McFarland, who is also an executive vice president.”

 

 


 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “More on Mega Bulk Sales”

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Gold – An Overview of Macroeconomic Price Drivers
      Fundamental Analysis of Gold As we often point out in these pages, even though gold is currently not the generally used medium of exchange, its monetary characteristics continue to be the main basis for its valuation. Thus, analysis of the gold market requires a different approach from that employed in the analysis of industrial commodities (or more generally, goods that are primarily bought and sold for their use value). Gold's extremely high stock-to-flow ratio and the main source of...
  • India – Is Kashmir Gone?
      Everything Gets Worse  (Part XII) -  Pakistan vs. India After 70 years of so-called independence, one has to be a professional victim not to look within oneself for the reasons for starvation, unnatural deaths, utter backwardness, drudgery, disease, and misery in India. Intellectual capital accumulated in the West over the last 2,500 years — available for free in real-time via the internet — can be downloaded by a passionate learner. In the age of modern technology, another mostly...
  • Cracks in Ponzi-Finance Land
      Retail Debt Debacles The retail sector has replaced the oil sector in a sense, and not in a good way. It is the sector that is most likely to see a large surge in bankruptcies this year. Junk bonds issued by retailers are performing dismally, and within the group the bonds of companies that were subject to leveraged buyouts by private equity firms seem to be doing the worst (a function of their outsized debt loads). Here is a chart showing the y-t-d performance of a number of these...
  • Pulling Levers to Steer the Machine
      Ticks on a Dog A brief comment on Fed chief Janet Yellen’s revealing speech at the University of Michigan. Bloomberg:   “Before, we had to press down on the gas pedal trying to give the economy all of the oomph that we possibly could,” Yellen said Monday in Ann Arbor, Michigan. The Fed is now trying to “give it some gas, but not so much that we’re pushing down hard on the accelerator.” […] “The appropriate stance of policy now is closer to, let me call it...
  • French Election – Bad Dream Intrusion
      The “Nightmare Option” The French presidential election was temporarily relegated to the back-pages following the US strike on Syria, but a few days ago, the Economist Magazine returned to the topic, noting that a potential “nightmare option” has suddenly come into view. In recent months certainty had increased that once the election moved into its second round, it would be plain sailing for whichever establishment candidate Ms. Le Pen was going to face. That certainty has been...
  • Mea Culpa – Precious Metals Supply and Demand
      Input Data Errors Dear Readers, I owe you an apology. I made a mistake. I am writing this letter in the first person, because I made the mistake. Let me explain what happened.   The wrong stuff went into the funnel in the upper left-hand corner...   I wrote software to calculate the gold basis and co-basis (and of course silver too). The app does not just calculate the near contract. It calculates the basis for many contracts out in the distance, so I can see the...
  • The Cost of a Trump Presidency
      Opportunity Cost Rears its Head Last Thursday’s wanton attack on a Syrian air field by the US and its bellicose actions toward North Korea have brought the real cost of candidate Trump’s landslide victory last November to the forefront.   It didn't take long for Donald Trump to drop his non-interventionist mask. The decision was likely driven by Machiavellian considerations with respect to domestic conditions, but that doesn't make it any better.   Unlike...
  • Heavily Armed Swamp Critters
      Worst Mistake GUALFIN, ARGENTINA – By our calculation, it took just 76 days for President Trump to get on board with the Clinton-Bush-Obama agenda. Now there can be no doubt where he’s headed. He’s gone Full Empire. Not that it was unexpected. But the speed with which the president abandoned his supporters and went over to the Deep State is breathtaking.     Once there was only a Trump fragrance called Empire... now he has gone full empire himself   Among the noise...
  • Hell To Pay
      Behind the Curve Economic nonsense comes a dime a dozen.  For example, Federal Reserve Chair Janet Yellen “think(s) we have a healthy economy now.”  She even told the University of Michigan’s Ford School of Public Policy so earlier this week.  Does she know what she’s talking about?   Somehow, this cartoon never gets old...   If you go by a partial subset of the ‘official’ government statistics, perhaps, it appears she does.  The unemployment...
  • Central Banks Have a $13 Trillion Problem
      Paycheck to Paycheck GUALFIN, ARGENTINA – The Dow was down 118 points on Wednesday. It should have been down a lot more. Of course, markets know more than we do. And maybe this market knows something that makes sense of these high prices. What we see are reasons to sell, not reasons to buy.   DJIA daily (incl. Thursday)... it was just taking a rest - click to enlarge.   Nearly half of all American families live “paycheck to paycheck,” say researchers. Without...
  • French Selection Ritual, Round Two
      Slightly Premature Victory Laps The nightmare of nightmares of the globalist elites and France's political establishment has been avoided: as the polls had indicated, Emmanuel Macron and Marine Le Pen are moving on to the run-off election; Jean-Luc Mélenchon's late surge in popularity did not suffice to make him a contender – it did however push the established Socialist Party deeper into the dustbin of history. That was very Trotskyist of him (we can already picture a future Weekly...
  • Trump Is An Insider Now
      Conspiracy of the Few GUALFIN, ARGENTINA – “U.S. stocks fall on Trump talk…” began a headline at Bloomberg. Or it may be Trump action. We had already counted six major campaign promises – including no O’care repeal and no “America First” foreign policy – already buried (some for the better).   A bunch of campaign promises get the MOAB treatment...  A great many  theories have been proposed to explain Trump's recent series of u-turns: 1. he is in thrall to...

Support Acting Man

Austrian Theory and Investment

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com