As part of its Key to Recoveryâ„¢ initiative, Fannie Mae announced some important policy changes to expand its mortgage guaranty business to serve the mortgage market’s urgent need for stability, liquidity and affordability. (more…)
Courtesy of TheOnion.
As Californians, troubled with the possibility of Countrywide Financial going bankrupt, rush to pull money from Countrywide Bank , we hear the news that “[t]he Federal Reserve, reacting to concerns about the subprime lending crisis that’s rocked financial markets in recent weeks, Friday cut its so-called discount rate half a percentage point, to 5.75 percent.†See CNN Money.
The Fed’s action sent the Dow Jones up about 230 points. Financial stocks, including Countrywide Financial were some of the biggest gainers.
After the Fed’s move and the stock market rally of Friday, I got an e-mail from one of my best friends, whose opinion is very valuable to me. My friend is an internationally recognized and respected author, speaker and attorney. His friends on Wall Street and I have always been amazed by his vision and accurate predictions, from the stock market boom of the 1990s and crash of early 2000s to the accounting scandals and housing boom. What’s more amazing is that he is not an economist; yet he has always been correct with financial market forecasts.
Here is an excerpt from his e-mail message:
“Fools rush today. The Fed must know things are a lot worse than most people know, since they wouldn’t drop the rate a full half point just to bolster a superficial stock market indicator that hasn’t even dropped 10% from its high yet. There’s a lot deeper trouble that I’m guessing they’re trying to head off, which is not a good sign.
MY PREDICTION: DOW 11,500.â€
Following the footsteps of American Home Mortgage, Aegis Mortgage Corp., once one of the nation’s top 30 largest mortgage lenders, filed for Chapter 11 Bankruptcy in Delaware last Monday, a few days after it laid off more than half of its 1,300 employees.
Since the start of this year, more than 50 mortgage lenders have sought bankruptcy protection from their creditors. (msnbc). What’s worse is that the number keeps growing with no end in sight. Now, it appears that Countrywide Financial, the largest U.S. mortgage lender, may be forced into bankruptcy, too. “There is a scenario,†wrote Paul Miller, a Friedman, Billings, Ramsey & Co. analyst, “in which the current liquidity crises last for longer than three months and Countrywide is forced into bankruptcy; it will be ugly, but it can happen!†(Yahoo! News).
Meanwhile, the Fed is silent. Let’s hope that silence is [still] golden.