Dec222012
Can you name all the bailouts to banks, homeowners, and government sponsored enterprises? It’s many more than you think
Last week I published a post that predicted that the Federal Reserve will start bailouts by performing principal reductions for underwater homeowners. I wanted to detail exactly how did we reach that stage. So, I wanted to briefly detail the last five years of housing bailouts. It was just an impossible task to sum up in a few paragraphs due the sheer number of programs.
If fact I should have have created this list first, would have made writing easy. I will attempt to name the program, the beneficiary of the program, and a brief description of the program. California local programs are not listed here, because I’m sure that there are dozens if not hundreds of local and state bailout programs.
| Program | Target | Description |
| Market-to-Market accounting change | Banks | It allowed to banks not document losses based on market value, until they foreclosed or sell the loan. Not a bailout per se, it was changed help out banks during this bubble. |
| $25 Billion Bank Settlement | Banks | It was meant to punish banks by ordering them to do $25 Billion of loan modifications. However, short sales are were consider modifications |
| Mortgage Forgiveness Debt Act | Loan Owners | Allows homeowners that have their debt discharged not taxed as regular income. Normally this discharged is taxed. |
| TARP | Banks | This was “loan” to banks to help return them to financial stability. |
| ZIRP (Zero Interest Rate Policy) | Banks & Loan Owners | The Federal Reserve set interest rates at 0% to help stimulate economy. However banks benefit by not paying real interest on CD’s. Loan Owners can also get a lower mortgage rate |
| Freddie Mac & Fannie Mae Takeover | Freddie Mac & Fannie Mae | This kept Fannie and Freddie out of bankruptcy. In the long term it allow the Federal Government directly control the Secondary Market |
| HAMP | Loan Owners | Underwater loan owners to get a loan modification for a lower rate. It was deemed too strict. |
| HARP | Loan Owners | Underwater loan owners would be able to get principal reductions under strict conditions. |
| FHA (subprime) | Banks | FHA was used to replace the private subprime lenders. It was used in conjunction with ZIRP to try and increase home values. The conforming loan limits were increased to help out the most bubble areas. |
| Tax Credit | Buyers | The federal government wanted to stimulate home purchase by offering a tax credit. After the tax credit end home sales dropped. |
| QE 1 and QE 3 | Banks | This is a policy of the Federal Reserve to create money and then use it mortgage banked securities with the intent of pushing down mortgage rates to reduce borrowing costs. |
| HAMP 2.0 | Loan Owners | A more liberal form of the HAMP program to increase the number of loan modifications |
| HARP 2.0 | Loan Owners | A more liberal form of the HAMP program to increase the number of loan principal reductions |
| Fed loans to banks | Banks | Overnight .25% annual over night loans to banks to used for lending |
| FHA Streamline | Loan Owners | It allows existing FHA borrowers to refinance to lower mortgage rate by lowering reducing required insurance premium |
| Hard Hit program | Banks, Loan Owners | It is a tax supported principal write down if the lender agreed to for 50% of the write down |
The sheer number of large programs is just too much to absorb in one afternoon. It does look like I should have created this list in a few minutes, but it actually took some time to create this table. Additionally, some these programs have multiple beneficiaries, or just directed at the banking industry in general. What would the be current state of the housing market if none of these programs existed. I’m confident that academics for generations will be studying this time in history…probably what we were thinking at the time.
Some of these programs just didn’t have one bailout component. For example, FHA 1) lower the qualifying credit scores 2) increased the conforming loan limits and 3) second purchase of another home after 5 years of residence. Even now FHA was trying to expand into mix use properties. Fannie Mae and Freddie Mac had similar expansion of their programs as FHA.
It would have taken too much time, but adding a cost to each program would be very educational. Some would be hard to measure, because how would measure the cost of QE, Larry did a post on that very subject yesterday.
Now, if you can think of additional national policy change, bank bailout, or tax payer bailout programs please list them in the comments. I really want to document all the programs.
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I missed this last week.
FBR: $700 billion in GSE mortgages will need special servicing
By Kerri Ann Panchuk December 19, 2012 • 3:29pm
The government-sponsored enterprises together have about $600 to $700 billion in unpaid principal balance tied to mortgage loans that will eventually require special servicing, suggested Paul Miller, with FBR Capital Markets, in a report Wednesday.
Miller’s estimation provides a sampling of what servicing opportunities await certain specialty servicers next year if they specialize in high-touch, credit sensitive loans.
The potential beneficiaries of this pipeline include special servicers, with Miller highlighting Walter Investment Management ($43.17 -1.31%) and Nationstar Mortgage Holdings ($31.61 -0.38%) as potential beneficiaries, Miller suggested.
Miller believes specialty servicers will assume most of the high-touch, credit-sensitive troubled loans from traditional servicers as those larger players struggle with today’s regulatory landscape and new capital requirements. These changes are making it more difficult for traditional servicers to handle large volumes of troubled loans at one time, he noted.
Miller cites Federal Housing Finance Agency data, which shows Freddie Mac has about $200 billion in unpaid principal balance that needs servicing, while Fannie Mae has $300 billion in servicing assets to shed. The FHA has about $150 billion in agency paper.
“This implies a total available unpaid principal balance pool between $600 billion and $700 billion, which should be more than enough to support growth for the company’s servicing business in the near term,” Miller noted.
Miller also is strong in his outlook for private-label servicer PHH Corp. ($22.91 -0.13%) and has raised his target price from $25 per share to $28 heading into 2013.
The company faced a $200 million write-down on its own mortgage servicing rights in the third quarter as mortgage rates fell, but with current mortgage rates down only 8-basis points, Miller says “markdowns” in the fourth quarter will mostly likely be “benign.”
He concluded, “We continue to believe PHH will benefit into 2013 as mortgage rates level off and the company builds cash at a meaningful rate given a continuation of elevated cash gain-on-sale margins and origination volumes.”
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[…] a compiled list (reported to be all?) of the programs aimed at helping the banks and homeowners in the housing crisis. And yet, the crisis is still ongoing. Share this:TwitterFacebookLike this:LikeBe the first to […]
HAFA is the program to encourage short sales. It has been an absolute dismal failure because the guidelines are too rigid. I believe only around 1% of short sales are eligible for the program.
HAUP is the program that allows unemployed borrowers up to 12 months of reduced or non-existent payments. This program is actually HAUP 2.0 because the original program only allowed 3 months of help.
You have a lot a great knowledge on these programs. Thanks for the help.
[…] The only group politicians really cared about helping were bankers. Do you think I’m being overly dramatic or cynical? Can you name all the bailouts to banks and government sponsored enterprises? […]