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.”

 

 


 
 

 
 

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:

  • The Golden Age Has Just Begun
      Some Things Actually Go Up Before and During the Fall... In recent issues of Seasonal Insights I have discussed two asset classes that tend to suffer  performance problems in most years until the autumn, namely stocks and bitcoin. I thought you might for a change want to hear of an asset that will be in a seasonal uptrend over coming months.   Many things, including bitcoin, stocks and leaves tend to fall in the aptly named fall... but some things actually start to...
  • Adventures in Quantitative Tightening
      Flowing Toward the Great Depression All remaining doubts concerning the place the U.S. economy and its tangled web of international credits and debts is headed were clarified this week. On Monday, Mark Yusko, CIO of Morgan Creek Capital Management, told CNBC that:   “…we’re flowing toward the path of 1928-29 when Hoover was president. Now Trump is president. Both were presidents with no experience who come in with a Congress that is all Republican, lots of big promises,...
  • A Look at the Gold and Silver Price Drop of 3 July, 2017
      Mystery Nosedive The price of gold dropped from $1,241 as of Friday’s close to $1,219 on the close Monday, or -1.8%. The price of silver fell from $16.58 to $16.11, or -2.9%. It is being called a gold and silver “smash” (implication being that one party or a conspiracy is doing the smashing).   The flight of the gold rocket, different phases [PT]   Our goal is to help you develop a clear understanding. The move was no mystery. Monetary Metals makes an intensive...
  • Tales from the FOMC Underground
      A Great Big Dud Many of today’s economic troubles are due to a fantastic guess.  That the wealth effect of inflated asset prices would stimulate demand in the economy. The premise, as we understand it, was that as stock portfolios bubbled up investors would feel better about their lot in life.  Some of them would feel so doggone good they’d go out and buy 72-inch flat screen televisions and brand-new electric cars with computerized dashboards on credit.   The Wilshire...
  • How Dumb Is the Fed?
      Bent and Distorted POITOU, FRANCE – This morning, we are wondering: How dumb is the Fed? The question was prompted by this comment by former Fed insider Chris Whalen at The Institutional Risk Analyst blog.   They're not the best map readers, that much is known for certain. [PT]   [O]ur message to the folks in Jackson Hole this week [at the annual central banker meeting there] is that the end of the Fed’s reckless experiment in social engineering via QE and...
  • India: The Lunatics Have Taken Over the Asylum
      Goods and Services Tax, and Gold (Part XV) Below is a scene from anti-GST protests by traders in the Indian city of Surat. On 1st  July 2017, India changed the way it imposes indirect taxes. As a result, there has been massive chaos around the country. Many businesses are closed for they don’t know what taxes apply to them, or how to do the paperwork. Factories are shut, and businesses are protesting.   A massive anti-GST protest in Surat  [PT]   Increases...
  • The Student Loan Bubble and Economic Collapse
      The Looming Last Gasp of Indoctrination? The inevitable collapse of the student loan “market” and with it the take-down of many higher educational institutions will be one of the happiest and much needed events to look forward to in the coming months/years.  Whether the student loan bubble bursts on its own or implodes due to a general economic collapse, does not matter as long as higher education is dealt a death blow and can no longer be a conduit of socialist and egalitarian...
  • The Money Velocity Myth
      Popular Imagery of Money on the Move For most financial commentators an important factor that either reinforces or weakens the effect of changes in the money supply on economic activity and prices is the “velocity of money”.   An image from an article on the intertubes that “explains” the velocity of money (one of the articles we came across started out as follows: “The economy runs smoothly only when there is enough money in circulation. How much is enough?” ...
  • Which Is Worse? America or France?
      French Fraud POITOU, FRANCE – “Which is worse? America or France?” The question must be put in context. We were invited to dinner with local farmers last night. Jean-Yves and Arlette live in a modest house in the nearby town – an efficient and cozy place built about 25 years ago. They’ve added a solarium to the back, where we had dinner.   FAF – French-American Friendship. These days it's a “which is worse” competition... [PT]   Arlette operates a...
  • Gold and Silver Capitulation – Precious Metals Supply & Demand Report
      Last Week in Precious Metals: Peak Hype, Stocks vs. Flows and Capitulation The big news this week was the flash crash in silver late on 6 July.  We will shortly publish a separate forensic analysis of this, as there is a lot to see and say.   Silver - 1,000 troy ounce good delivery bars, approved by the COMEX. Whatever you do, do not let one of these things land your feet. For readers used to the metric system: these bars weigh approximately between 28 to 33 kilograms...
  • No “Trump Bump” for the Economy
      Crackpot Schemes POITOU, FRANCE – “Nothing really changes.” Sitting next to us at breakfast, a companion was reading an article written by the No. 2 man in France, Édouard Philippe, in Le Monde. The headline promised to tell us how the country was going to “deblock” itself.  But upon inspection, the proposals were the same old claptrap about favoring “green” energy... changing the tax code to reward one group and punish another...  and spending more money on various...
  • Putting the Latest Silver Crash Under a Lens
      An Unenthusiastic Market On Thursday, July 6, in the late afternoon (as reckoned in Arizona), the price of silver crashed. The move was very brief, but very intense. The price hit a low under $14.40 before recovering to around $15.80 which is about 20 cents lower than where it started.   1 kilogram cast silver bars from an Austrian refinery. These are available in 250 g, 500 g and 1 kg sizes and look really neat. We use the 250 g ones as paperweights, so this is an...

Support Acting Man

j9TJzzN

Austrian Theory and Investment

Own physical gold and silver outside a bank

Archive

350x200

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

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]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

savant