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It looks like some of my mortgage and housing predictions for 2009 that I posted on January 1st are starting to become reality. These predictions may be a little off on the exact facts and players who came to the plate, but these investment players are all cut from the same government or Wall Street cloth.
My first prediction to come true would be:
- The Government Will Purchase $500-$700 Billion in Mortgage Backed Securities.
The US Treasury will coordinate with the remaining banks and mortgage servicers to purchase $500-$700 billion in toxic mortgage backed securities owned by investors.
The main purpose will be to stabilize housing prices and will work hand and hand with my #1 prediction. The second goal is to perform loan modifications to keep people in their homes, prevent foreclosure and thus stabilize home values.
The New York Federal Reserve announced today that it is purchasing $500 billion in mortgage backed securities in order to support the U.S. housing market.
The New York Fed “began purchasing fixed-rate mortgage- backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae,” the Fed bank said in a statement today. “Selected private investment managers are acting as agents of the New York Fed in these purchases.”
It looks like I was off only by the government agency on that prediction. My prediction on Jan 1st was that the US Treasury would make the 500 billion dollar purchase and I am still standing by that prediction also.
So, with that said I predict that in addition to the New York Fed’s purchase of $500 billion in mortgages from Fannie Mac and Ginnie Mae, that the US Treasury will still purchase $500 billion plus in privately investor owned toxic mortgage backed securities.
This will bring the total in government home mortgage bailout money to over $1 trillion.
Below is my next prediction that is starting to have hints of coming true:
2. Former Hedge Funds Reinvent Themselves as Banks:
- The remaining hedges funds with sufficient backing and clout will become legit under the guise of becoming bankers. The FDIC will continue to cease banks and the only people with enough money to buy these banks will come from the shadows of the secret shadow banking system
Again, I am off by the players involved and who will be buying the banks. But as I predicted on January 1st, hedge funds (AKA investors) are looking to buy up failed banks and their distressed assets. Yesterday, the world’s most infamous distressed asset investor, Wilbur Ross announced on CNN that he is about to buy a bank.
Billionaire investor Wilbur Ross, known for his investments in distressed companies in the steel, automotive industries, said it is only a matter of time before his firm acquires a bank.
“We will end up with a bank, there is no doubt about that,” Ross, the chairman and CEO of WL Ross & Co., said in an interview Tuesday.
Ross, a major player in the private equity industry, said that his plans to purchase a depository institution were delayed last year after the government moved to inject capital into the nation’s banking system as part of a broader effort to halt the financial crisis.
Last Friday, a group of private investment firms, including buyout shop J.C. Flowers & Co and hedge fund Paulson & Co., struck a deal with the Federal Deposit Insurance Corp. to buy failed mortgage lender IndyMac for $13.9 billion.
As part of the deal, the buyers will take responsibility for the first 20% of losses, and the FDIC will cover the majority of additional losses.
Last week’s IndyMac announcement is particularly noteworthy since there have only been a few investments made in banks by private equity firms and other distressed investors in recent months — and many of those deals have quickly soured.
Please watch the Wilbur Ross video on Money CNN
