The end for mortgages?

I really am not asking the question in idle.

( Apparently the primitive survival basic instinct even in dumbed down n***** companies like FRE and FNM are still present. )

The implication of this announcement is far reaching because

1. NY is present in all subprime deals out there. In securitized products, there simply is no mechanism other than outright dump of the security to adhere to the new policy. There is no resecuritization avenue of loans out of the Trusts - None.

For example see the snapshot of a deal from Indymac (a Californian bank) with a bunch of NY loans in it.

2. The legal protection in NYC is only for subprime? Well, define prime vs. subprime. And even if you could, what would be the odds in NYC the law is going to be inclusive for everyone in the very near future? THAT'S WHAT I THOUGHT.


3. And what other states are offering "legal protection" for "home owners" who default? What would happen to loans from those places? Different from those of NY? I didn't think so.


Enjoy:



















Aug. 12 (Bloomberg) -- Freddie Mac, the second-largest U.S. mortgage finance company, will stop buying subprime loans issued in New York state as a new law takes effect that holds investors accountable for mortgage fraud. Freddie won't buy loans dated on or after Sept. 1 that meet the state's subprime definition, the McLean, Virginia-based company said today in a lender bulletin on its Web site.


New York Governor David Paterson last week signed new foreclosure and lending laws that tighten legal protections for borrowers. The legislation holds mortgage buyers like Freddie liable in ways that ``we have no way of monitoring and preventing,'' company spokesman Brad German said in a telephone interview. Government-chartered Freddie and Fannie Mae, which together own or guarantee 42 percent of the $12 trillion U.S. home loan market, are both slowing their mortgage purchases after last week posting bigger-than-expected losses for the second quarter.


The companies have been battered by record delinquencies and rising losses as they struggle to shore up their weakened balance sheets amid the worst housing slump since the Great Depression. The state law may disproportionately affect borrowers looking to use state and federal mortgage rescue programs to refinance out of unaffordable subprime loans, German said. It will affect a ``very, very small number'' of loans, he said. (See the above writeup from me to see what really will happen).


`Compounds the Situation' A group that advocates affordable housing, the National Community Reinvestment Coalition, is ``very troubled by Freddie Mac's announcement,'' said David Berenbaum, executive vice president. ``In a market that doesn't have liquidity right now, it compounds the situation because it forces consumers to go to less responsible third parties,'' said Berenbaum, whose Washington- based group represents more than 600 housing nonprofits in the U.S. ``Fannie and Freddie have a responsibility to lead us out of this crisis as public chartered institutions.'' Fannie spokesman Brian Faith declined to comment on Freddie's announcement.


Paterson spokeswoman Erin Duggan didn't have an immediate comment. Freddie rose 1 cent, or 0.2 percent, to $5.61 as of 1:33 p.m. in New York Stock Exchange composite trading. Washington- based Fannie fell 23 cents to $8.17. Shares of both companies have dropped about 90 percent in the past year. Subprime loans are issued to borrowers with poor credit or high levels of debt. To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net