I believe they are in an OK position as well, in fact have believed so since 2010 when delinquencies began to ebb.
This is hard for me to say without coming accross as being a big govt liberal, but I believe America should leave F&F alone. Tax payers get a pretty big bang for their buck when it comes to back stopping these two agencies.
Although my politics are prone to be toward free markets, in this situation it seems to me that it is highly advantageous to have them back stopped by the tax payer so that no matter how hard it is to raise capital on wall street, that main street america will have a source of obtaining mortgages through F&F.
Here is a cut and past from their earnings new release on May 9th;
• Improvement in Fannie Mae’s financial results, the strong credit profile of the company’s new
book of business, and other factors enabled the company to release $50.6 billion valuation
allowance on deferred tax assets.
• Based on net worth of $62.4 billion at March 31, 2013, the company’s dividend obligation to
Treasury will be $59.4 billion by June 30, 2013. After the June payment, we will have paid an
aggregate of $95.0 billion in cash dividends to Treasury since conservatorship began. Senior
preferred stock outstanding and held by Treasury remained $117.1 billion at March 31, 2013, as
dividend payments do not offset prior Treasury draws.
I read an article this morning that stated the company Fannie Mae is worth $62 Billion, I am not sure if that is tangible book value or what. They made $7 billion or so during this past quarter but are able to pay back the govt $58.7 billion next month because of a tax credit?? How can a company worth only $62 billion be able to pay back the American tax payers $58.7 billion?
How can a company worth $62 billion pay back $58.7 billion?
Am I missing something here? By tax credit of $51 billion do they actually mean that most of this payback to tax payers is through accounting on paper? Or are they actually wiring $58.7B in money to the treasury?
the ten year treasury buted through the 200 mda, or used it as a launch pad more like it. I have very little doubt tha the 10 yr treasury wil be up above 2% before the end of May.... that is unless our housing industry stays in the dulldrums leadng ou economy to remain at stall speed.
Today the auction of 10 yr treasuries will be interesting to watch. The reason being is because the Fed can get involved at certain psychological levels just to send a signal to the market. Presently the 10 yr note is battling the 200 mda and at this moment is acting as if the Fed is in there buying. With an auction later today why else would the 10 yr being acting like it is with additional supply coming online in a couple hours from now.
On the other hand, if the yield goes up from here breaking through resistence, it might signal the Fed is going to allow rates to go up to 2% or beyond.
This may seem odd to those who think the Fed must buy $85 billion per month, but actually the Fed buys much more than $85 B monthly because they also soak up enough to cover runnoff. In the past several months they've been buying almost $85B in just MBS alone, so if they were to curtail their purchases to the stated goal of only $85B then the 10 year yield will be going up in theory.
bondgal, we will see some wage inflation in some job positions, in fact we already have seen a problem this spring (past couple months) in the housing industry as our country is unable to build housing in some parts of the country because there are not enough workers.
In other words if they could increase the price of the house enough to cover the cost of building it profitably there would be more new sfh construction going on right now.
In fact our country has been importing jobs the last few years more than normal, there will come a time when our international corporations start investing outside the US at a faster pace as we start exporting more jobs like we used to when jobs were tight.
By the way, if you check the numbers, our housing did not turn on a dime, it was more akin to turning a large air craft carrier. Slowly and methodically , region by region , demand and supply evened out. Presently so much of our capacity to build homes has been wiped out that it is panicking those trying to buy homes in this market with low inventory.
Step by step we are moving toward a shortage of workers in this country. If we start getting our act together in tracking illigal immigrants over staying their visa' my wild guess is that the next president will be a Republican that passes legislation giving a "path" to legally stay here for many illegals.
What showed up in our job numbers today is that we have higher participation rate of available workers in tandem with an uptick of under employed workers.... meaning more part time workers being hired.
We had job growth but fewer hours worked?? HUH?
As our country digests Obama care the landscape and make up of our work force is changing right before our eyes. What seems like such a radical prediction of a shortage of workers will become much more believable as we see the trend continue. IMHO.
quote from "MBS Highway"
The Federal Housing Finance Agency (FHFA) House Price Index showed an increase in home prices of 7.1% from last year. This index measures homes with conforming loan amounts. You might recall that yesterday’s Existing Home Price report showed homes increasing 11.8% from last year. This suggests that higher priced homes are appreciating at a greater rate. And speaking of yesterday’s Existing Home Sales Report, the miss in units sold was clearly due to a shortage of inventory compared to the high demand. Any time demand outpaces supply, prices have nowhere to go but up.
More good news on housing came via the New Home Sales report this morning. Builders have been reporting huge demand and tight supply. The Median Price is up to $247,000 and supply of homes on the market remains at 4.4 months. The housing market has been hot and will remain that way. Among the many factors we have discussed is record low affordability. It has never been more affordable to purchase a home.
Consider this – back in 1980, the median home price was $93,000. Today the existing median home price is $184,300. Taxes and Insurance on a home back in 1980 were about $150 per month cheaper than they are today. But, interest rates back then were about 13.5%, compared to today’s 3.5%. The total payment for principal, interest, taxes, and insurance at an 80% loan to value today is $50 per month less than it would have been over 30 years ago. Add inflation in the mix and prices today are a small fraction of what they were back then.
Stocks have powered above their 25-day Moving Average, while Mortgage Bonds have maintained themselves above their 200-day Moving Average. We will float carefully to begin the day.
morin, some food for thought: financials make up a much smaller market cap weighting of the SP 500 than they did before Ben Bernanke took over. I dont disagree with your premise that Ben has helped them, however the market cap of the financials is actually smaller.
You need to consider what the earnings and market cap of "Wells-Chovia" was back in 2006.
taking a second glance I noticed the consumer "early" delinquencies had improved the past two quarters... therefor they will make an impact in non-performing assets and loan losses begining next quarter but really showing up in q3-2013. Just looking at present 30-89 day delinquencies one can forcast even further improvement in loan losses another $200 million in Q3
I would forcarst LL of S1.4B in q2, S1.2B in q3 and perhaps only $1.1B in q4 = $5.1B for all of 2013!!
Depending upon how many loan modifications they are presently doing, we might see non-performing assets shrinking $2.5B in q3 and shrinking a similar amount in q4 again. This is based upon fewer delinquencies in tandem with fewer REO' (assuming higher prop values lead to fewer REO')
biggator, not to be arguemenative, but reduced credit losses and cost cutting are considered "strong income"; in otherwords their weak income which is not predictable nor repeatable are such things as reduced charity giving and some type of trading income that really added some pop to their bottom line. You are right to point out that Wells is not growing albeit that is not such a bad thing for a dividend stock.
you are confused by headlines versus specific data.
When you say housing recovery, the only thing I can think of is that you have read some articles that discuss the valuation of homes has increased. I have not read anything or heard anyone mention that they believed more mortgages were going to be originated this quarter.... in fact everything I have read and heard predicts there will be a considerably less amount of mortgages being made through the forseeable future.
Our country wont go through another mortgage boom unless rates take another leg down or if banks become more lenient on helocs to small business owners.... both of which the media has been saying is not happening.
at first glance I noticed that specifically the commercial loan portfolio had encouraging numbers within their net charge offs and delinquencies. Other than that I didnt see anything that stood out. Hopefully going forward their residential loan portfolio will make as much progress as the commercial side did.
It would be nice to see interest income to grow and non-performing assets to shrink much faster.
On the whole I dont see much to complain about , after all analysts did warn us about reduced originations this quarter. Suddenly only $6B in loan losses for all of 2013 and $80B in loan originations for q3-2013 dont seem like such a radical statement anymore, but rather what everyone else will now come to believe.
Sorry, but I just had to give my self a pat on the back. I enjoy making radical predictions and if you dont remind people of the past arguements we have had on the board it is human nature for those who were wrong not to learn.
amisock, I am not sure what your point is. The CFO doesnt change the accounting practices from quarter to quarter as if it has anything to do with how he runs the company. I took a glance at the prediction of earnings last night and was warned that revenues would be down. The CFO cant just change their accounting practices to show that the income is also down just because niave people like you feel income and revenues should move in lock step. There are reasons why last quarters income was low relative to its revenues and also why this quarters income increased slightly. What would you have Wells Fargo do make up a bunch of numbers so that the income moved lock step with the revenues?
jimmiller is correct. Historically Wells has not gone after online brokerage accounts, it apparently doesnt fit their business model. However somewhere along the line during the past few months they uncerimoniously sneaked in a competetive rate for online trading. I would expect they are not changing their ways too quickly but rather just trying it out to see the impact on retaining and gaining customers etc etc.
What I mean by not changing their ways, is that I dont expect they are improving their customer service which takes monumental effort and time. However if they felt the need they could invest a few million into the software and employees to compete if they decided to tweak their business model.
For those who have said Wells fees are high with awful customer service, they WAS true a few months ago, however things change with the pricing in ways that are not totally advertised to the public
Uncle, everyone that is upset with our politicians should stand up and point the finger of blame not at the Republican party, not at the Democratic party, but at people like you and your ilk. Does he have a bad memory? No. Is he a hypocrit? No.
Its called compromise, and its time America took more of an uncompromising stand against being uncompromising. You and all of these talking heads on TV making a living by riling up the masses.
If it wasnt for voters such as your self we could come together and balance the budget. The original intent of the constitution was to force our leaders to compromise. By calling him a hypocrite you just point out what the real problem is: which is you yourself unclestall.
we are talking past each other. I cannot prove my assumption that people that have chosen to obtain permanent disability have left the workforce for ever, however it makes sense to me they have left the workforce and has led me to theorize our participation unemployment rate will continue downward.
Its a theory of mine in which I could be proven wrong with the passage of 5 years.
Also I believe a confluence of events will lead to corporations to start buying their goods and employing labor outside of the US once again .... one of these events being the shortage of labor.
And the weakest point I made was refering to the negative flow of immigrants. This trend may reverse and thus give our country a fresh pool of laborers.
And then of coarse to reiterate my strongest point backing up my theory, demographics.
In the end we may wind up with a shorttage of labor and my conclusions turn out right for the wrong reasons. Something I have not mentioned is the notion some economits state we already are experiencing a shortage of labor. It has to do with so much capacity was destroyed from 2006 through 2011 within the realestate industry that our country is finding it difficult to ramp up in some regions. Also there is the belief that Al has in that many tech companies do lobby congress for more worker visa'..... however I am suspicious albeit it does add creedence to my theory
I was being serious.
In fact I believe if the economy were to have a sustained improvement our country would run into a problem of not having enough workers.
I dont understand what part of my post that you dont get.
A stronger dollar does cause corporations to invest into other countries, thus transporting jobs over seas. Is this something you disagree with? A strong dollar transports jobs overseas as their wages & goods become relatively cheaper.
The reason the unemployment rate will drop:
1) our population is aging
2) participation rate will drop as more people go on disability
3) illegal immigration statistics are presently in the negative, and may stay that way unless we become more accomdative;