More on Mega Bulk Sales
Yesterday, FHFA announced the long awaited first Mega Bulk Sales of REO properties in the hardest hit areas – see (pdf)
I can summarize the program for you: mega stupid.
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
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 - we want to once again thank all of you who have supported us with donations.
To donate Bitcoins, use this address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
Thank you for your support!
One Response to “More on Mega Bulk Sales”
Most read in the last 20 days:
- Why Do We Let Other People Tell Us What to Do?
Lame Theories of Government We have been disappointed with political ideas and theories of government. They are nothing but scams, justifications, and puffery. One tries to put something over on the common man… the other claims it was for his own good… and the third pretends that he’d be lost without it. Most are not really “theories” at all… but prescriptions, blueprints for creating the kind of government the “theorist” would like to have. Not surprisingly, it is a...
- Gold and Gold Stocks – Back to Tricky, but Interesting Signals Emerge
A Relentless Short Term Decline When we last discussed the gold sector, we noted that with gold approaching its 200 day moving average, a pullback had to be expected soon. In the meantime, a bit more than just a pullback has happened, as a severe sell-off started after the October FOMC announcement. Photo via genius.com However, as you will see below, this has most likely merely reset the clock a bit in terms of anticipating a medium term trend change (even if...
- Gold and Gold Stocks – It Gets Even More Interesting
Technical Backdrop If only we could get a dime for every bearish article on gold that has been published over the past two weeks...but one can't have everything. When a market is down 83% like the HUI gold mining index is, we are generally more interested in trying to find out when it might turn around, since it is a good bet that it is “oversold”. Of course, it if makes it to 90% down, it will still be a harrowing experience in the short term. We like these catastrophes because...
- The Greatest Racket of All Time
The Successes of the Global War on Terror One would think that the so-called “Global War on Terror”, which has been given fresh impetus by the Paris attacks, must be going swimmingly. What else could explain the great enthusiasm with which it is pursued? It may be recalled that it started in earnest after the WTC attack – also a declaration of war, as it was put at the time. As is often the case when Islamist fundamentalists strike, the actual attackers immolated themselves on...
- The Long, Cold Winter Ahead
Not Immune Cold winds of deflation gust across the autumn economic landscape. Global trade languishes and commodities rust away like abandoned scrap metal with a visible dusting of frost. The economic optimism that embellished markets heading into 2015 have cooled as the year moves through its final stretch. Photo credit: David Byrne If you recall, the popular storyline since late last year has been that the U.S. economy is moderately improving while the...
- How Do People Destroy Their Capital?
There is no Santa Claus I have written previously about the interest rate, which is falling under the planning of the Federal Reserve. The flip side of falling interest rates is the rising price of bonds. Bonds are in an endless, ferocious bull market. Why do I call it ferocious? Perhaps voracious is a better word, as it is gobbling up capital like the Cookie Monster jamming tollhouses into his maw. There are several mechanisms by which this occurs, let’s look at one...
- Junk Bonds Under Pressure
While the Stock Market is Partying ... There are seemingly always “good reasons” why troubles in a sector of the credit markets are supposed to be ignored – or so people are telling us, every single time. Readers may recall how the developing problems in the sub-prime sector of the mortgage credit market were greeted by officials and countless market observers in the beginning in 2007. Photo credit: Getty Images At first it was assumed that the most highly...
- US Economy – Not Getting Better
An Update in Light of Recent Data Releases Since our last updates on the manufacturing sector of the US economy (in chronological order: “Is the US Economy Close to a Bust?” and “More Ominous Data Points”), new data have been released and our friend Michael Pollaro has mailed us updated versions of his charts, so we decided to provide another update. So far, there is no sign that the emerging downtrend in manufacturing activity is stopping or reversing. The recent manufacturing...
- Angry Belgian Muslims and the Price of Welfare Statism
Ill-Tempered Mohammedans in the Socialist Paradise In the wake of recent revelations about the identities of the morons involved in the horrific Paris attacks (happily, most of them shuffled off the mortal coil as well, thereby improving the aggregate degree of moral clarity and intelligence in the world), a friend pointed us to an article at Unz Review that asks: “Why Does Belgium Have Such Angry Muslims?” Our instinctive, immediate reaction was to argue that the bland, boring...
- Can Investors Trust the New Gold Fixing?
Statistical Analysis of the New Gold Fixing Since 20 March 2015 a new gold price fixing organized by the London Bullion Market Association has been in operation. It has replaced the previous price determination process, which was in place for more than a century and became subject to criticism as it was highly vulnerable to manipulation. Has manipulation now ceased? Gold fixing at N.M. Rothchild and Sons offices in London. The first fixing took place there on 12 September...