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The 'Invisible' Mortgage Banker: Wall Street.
Thanks to all those TV commercials as well as big full-page ads in The Wall Street Journal and The New York Times, some consumers actually have a vague idea that Fannie Mae and Freddie Mac play a role in the mortgage market - providing liquidity to thousands of lenders.
Most consumers, though, probably don't realize that the GSEs only play a role in the conventional market, eschewing - for the most part - subprime, no-downpayment loans and other nonconforming products. As the industry well knows, Fannie and Freddie buy some nonconforming loans, but less face it - their volumes in these niches are paltry.
Indeed, Fannie and Freddie are the "invisible men" of the mortgage industry. The only time they get much press outside of the business pages is when a scandal darkens their doorway, as it has the past 18 months. Each GSE has seen its reputation harmed by huge accounting blunders. Freddie was making so much money that its top brass felt it had to save some ($5 billion) for a rainy day. Fannie had a slightly different problem: it thought it could delay $9 billion in impairment charges that it should've been taking.
Both GSEs got their knuckles wrapped but good and their top executives were tossed overboard. By the fall '05 Congress is expected to pass legislation, creating a regulator that can actually sue the GSEs in Civil Court, a regulator that won't have to beg Congress for money when the need arises.
That's all well and good. Companies as large as Fannie and Freddie ($1.5 trillion in on-balance sheet assets) need a real regulator. But what about Wall Street - the other "invisible" man of the mortgage industry? Huh? That's right - Wall Street, those firms south of Canal Street that have huge mortgage conduits, conduits that (intentionally?) operate behind the scenes, buying and securitizing all those wild-and-crazy loans that the GSEs won't touch.
Who am I talking about here? Let's name names: Bear Stearns, CSFB, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley. I'm sure I've left a few firms off the list and for that I apologize. Yes, all these powerhouse of finance are now key and very important players in the residential mortgage market - but Main Street USA doesn't know it.
Why are Joe and Josephine Six-Pack in the dark? ...
- Fannie, Freddie & Fees; With the GSEs fading, Wall Street may lose another...
- Magazine article from: Investment Dealers' Digest Rozens, Aleksandrs September 15, 2008 700+ words
...have less need for Wall Street firms that help them...important client of Wall Street," says Art Frank...adding that the GSEs are still a major...of funding, the GSEs will modestly increase...been diminished for Wall Street firms at a time when...
- Wall Street Banker Is Pick to Fill Treasury Post Dealing with GSEs.
- Magazine article from: National Mortgage News July 14, 2003 700+ words
...Bush announced his intention to nominate Wall Street investment banker Kenneth H. M. Leet...produced a study showing that the two GSEs could improve their disclosures on mortgage...regulation and supervision of housing GSEs in the wake of the management shake...
- Getting GSEs Main Street & Wall Street Together: Wouldn't it be nice if there...
- News wire article from: Mortgage Line Garritano, Anthony May 18, 2007 700+ words
...understand first." PROGRESS MADE The GSEs have gotten together on a streamlined 1003 and conversion of the 1003 to Spanish. The GSEs agreed on 83 non-executable Spanish translations...moderate-income families. Similarly, both GSEs have jointly developed master and short...
- Should GSEs' AU Systems Be Eyed?
- Magazine article from: Origination News Kersnar, Scott March 1, 2008 700+ words
...market was that the GSEs "lowered their standards...Nevertheless, Wall Street and the mortgage industry...Further, since the GSEs accepted much lower...credit agencies and Wall Street were duped into believing that the GSEs' ability to determine...
- Bear: Street Moving into Space GSEs Have Left: Origination underwiting is a...
- News wire article from: Mortgage Line Sinnock, Bonnie October 18, 2006 700+ words
...seminal MBS team at Wall Street firm Salomon Brothers...Citigroup). Now that Wall Street is moving into the GSEs' former turf, it...against them" during his Wall Street career he is "not...fortune. Whether the GSEs recover is a "political...
- Bear: Street Moving into Space GSEs Have Left: Origination underwiting is a...
- Magazine article from: Origination News Sinnock, Bonnie October 1, 2006 700+ words
...seminal MBS team at Wall Street firm Salomon Brothers...Citigroup). Now that Wall Street is moving into the GSEs' former turf, it...against them" during his Wall Street career he is "not...fortune. Whether the GSEs recover is a "political...
- CBO: GSEs control conventional, conforming.(Congressional Budget Office)(Brief...
- Magazine article from: Origination News Collins, Brian July 1, 2001 700+ words
...seemed to be impressed that the GSEs are passing on nearly $7 billion...This report confirms that the GSEs are performing a function that...Reserve Board, and even some Wall Street analysts. "Make no mistake...numbers on the benefits the GSEs provide to the American people...
- GSEs Finally Bow On IOs/POs.
- Magazine article from: National Mortgage News Collins, Brian July 23, 2007 700+ words
...Lockhart initiated discussions with GSEs on the NTM guidance back in...NTM and subprime loans to the GSEs to comply with new standards...Lockhart said. However, the Wall Street conduits that issue private...that his discussions with the GSEs about their purchases of private...
- Greenspan Sees GSEs As Not 'Invulnerable'.
- Magazine article from: National Mortgage News Collins, Brian July 31, 2000 700+ words
...rate subsidies they receive as GSEs, as well as their size and...reconsider the implicit subsidies the GSEs receive. But prior to last...officials have been telling Wall Street analysts that the issuance of...and regulation of the housing GSEs and impose more market discipline...
- 'Business As Usual' for GSEs.
- News wire article from: Mortgage Line Sichelman, Lew October 23, 2008 700+ words
...Treasury Department can provide the GSEs capital under the new law...Fannie Mae's Ms. Whip said the GSEs' top priority is "to bring...40% in 2005 and 2006, when Wall Street dominated the market, and...buy homes is only part of the GSEs' goal. The other, she said...
Source: HighBeam Research, The 'Invisible' Mortgage Banker: Wall Street.