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.”






We are happy to report that our funding target has been reached – once again, a hearty thank you to all contributors, your support is greatly appreciated!

As a result of us having gotten from A to B, the annoying graphic is hereby retired. However, be aware that the donations button continues to exist. It is actually perfectly legitimate to use it during the non-funding season as well; assorted advantages we have listed that often result from doing so are likewise persistent (i.e., increased happiness, children including you in their songs, potential obtaining of privileges in the hereafter, etc., etc.). Unfortunately we can't promise that it will make the gold price go up, but we're working on that.

Thank you for your support!


To donate Bitcoins, use this 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:

  • underpass-libraryThe Baby Boomer Survival Guide (Part I)
      The Yellow Machines Go Silent PARIS – What should you do if you are running out of time and money? This is the question we get from readers over 50… over 60… and sometimes over 70. We baby boomers were famously “na… na… na… live for today.” Now, it’s tomorrow. And many of us – often through no fault of our own – are having trouble making ends meet. At the Diary, we write about the world of money. About economic policy and how it affects you. But what if,...
  • Stockholm-Protest-BannerRefugee Crisis Blowback
      A Sharp Turn in Swedish Politics When we recently discussed Europe's refugee crisis, we mentioned that a sizable political backlash was to be expected and that unfortunately, extreme nationalist parties were likely to be among the main beneficiaries. We also mentioned the situation of Sweden, where the mainstream political parties in an ongoing fit of political correctness bordering on lunacy have apparently decided to transform Sweden into a province of Mesopotamia.   Leader of...
  • U.S. Rep. Ron Paul (R-TX) speaks during the Republican Leadership Conference in New Orleans, Louisiana June 17, 2011.  REUTERS/Sean Gardner (UNITED STATES - Tags: POLITICS)Tell us Ron, What's the Plan, What's the “Austrian” Plan?
      What? No Austrian Prescription? Bloomberg Reporters Cannot Believe It This is truly funny. Ahead of the FOMC decision, Ron Paul, who is well-known as an an implacable critic and enemy of the Fed and a fan of the Austrian School of Economics, was interviewed at Bloomberg as to “what the Fed should do”. What makes it so funny is that the Bloomberg reporters seemingly cannot believe that Austrian economists simply have no “prescriptions” for the Fed. They keep pushing Ron Paul for...
  • SwanUS Stock Market: A Retest or Worse?
      Gray Swans and Black Swans By Monday's close, the S&P 500 Index was closing in on the low established in the August swoon – such a retest was essentially our minimum expectation, as V-shaped rebounds are very rare. The question is now whether it will only be a retest, or if something worse is in the offing. No-one knows for sure of course, but we'll briefly discuss what we are looking at in this context.   Image via NYTimes   It is interesting that as the market...
  • St._Benedict_delivering_his_rule_to_the_monks_of_his_orderThe Baby Boomer Survival Guide (Part II)
      A Lehman Moment for Commodities? LONDON – Today, we continue our philosophical look at what you should do if you are running out of time and money. (You can catch up on Part I here.) Where do we begin? With how to add wealth? Or how to lose it? The way to lose it is simple. You buy something that is not worth the money you paid for it. You are instantly poorer, whether you know it or not.   The pleasingly plump. Illustration by jdeer69     DJIA, daily...
  • 3 EURO FRONTEU Moloch in a Fresh Bid to Inflate
      Brussels Alters Capital Requirements to “Spur Lending” Saints preserve us, the central planners in Brussels are giving birth to new inflationist ideas. Apparently the 2008 crisis wasn't enough of a wake-up call. It should be clear by now even to the densest observers that a fractionally reserved banking system that flagrantly over-trades its capital is prone to collapse when the tide is going out. 2008 was really nothing but a brief reminder of this fact. The political and...
  • doom2Climate Fanatics Run Into Public Relations Snag
      Scientists Turn into Stalinists Last week, we happened  to stumble across a press report about a group of climate scientists so eager to shut up their critics that they want to employ the State's police, courts and jailers for the purpose. Specifically, a group of academic (and presumably tenured) climate alarmists supporting the “CAWG” theory (CAWG=”catastrophic anthropogenic global warming”) have written a letter to president Obama, attorney-general Lynch and OSTP director...

Support Acting Man


Own physical gold and silver outside a bank

Realtime Charts


Gold in USD:

[Most Recent Quotes from]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


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!