From Bloomberg (4/24/09):
Known as the “HomeSaver Advance” plan, Fannie used the program to provide “foreclosure prevention assistance to distressed borrowers,” according to its 2008 securities filing.
The plan entailed Fannie funding loans to help distressed borrowers get current on their mortgage payments. Fannie said there were about 71,000 advances made in 2008 with an average value of $6,500.
Really Thinking
Fannie funded $462 million in such loans during 2008. The company tells investors in notes to its financial statements, though, what it thinks the loans are actually worth.
Based on market prices, Fannie said the loans had a value of just $8 million. That’s right, the loans, which are in many cases just months old, were worth 1.7 cents on the dollar.
In a footnote, Fannie said there were several reasons for the huge markdown. Among them: the loans aren’t secured by any collateral; and they are second loans, or liens, that serve as catch-up payments for borrowers who can’t pay their primary debt. (more…)
“The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’” ~Ronald Reagan
