...Fannie Mae and Freddie Mac Fannie Mae and Freddie Mac are private corporations that were established by Congress and are referred to as government sponsored enterprises or GSEs. They are the largest “packagers” of individual mortgages into mortgage backed securities (MBS) which they guarantee against loss. We will be addressing the following threats to your financial institutions stability. Counterparty risk. Internal and external vulnerability and threats. Stemming the tide of losses from overly aggressive practices in lending continues to retard the marketplace and has yet to reach equilibrium. The use of macro measures is of critical importance in returning the company to profitability. \ The use of Macroeconomic Measures, Using Aggregate Data. These measures approach threats to financial stability from the top down: Is aggregate credit growing too fast? Are credit underwriting standards falling? Are asset prices too high relative to fundamentals? “In an internal boom-bust cycle, an initial market upswing entices new investors and rising prices until additional capital or investors’ nerves are exhausted.”(Evanoff, Kaufman, and Malliaris, 2012). “This process can be amplified by capital rules that encourage banks to increase leverage when the economy is expanding and loan losses are low.” (Hanson, Kashyap, and Stein, 2011). “In the ensuing bust, a credit crunch can occur as participants switch from lending too much to lending too little.” (Brunnermeier, 2009). A selling...
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...cash flows and similar features are packaged into interest-bearing securities with marketable investment characteristics. Securitized assets have been created using diverse types of collateral, including home mortgages, commercial mortgages, mobile home loans, leases, and installment contracts on personal property. The most common securitized product is the mortgage-backed security (MBS). The following types of mortgage loans are most suitable for securitization. 406 M A N A GI N G T H E C R I S I S Conforming Residential Loans Conforming residential loans are single-family, performing (one-to-four family) mortgage loans that conform to Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) guidelines and/or standards. In 1997, these agencies had more than $3 trillion of outstanding mortgage securities backed by conforming residential loans. Nonconforming Residential Loans Nonconforming residential loans are single-family, performing (one-to-four family) mortgage loans that do not conform to...
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...business field. For example, The American Institute of Public Accountants (AICPA) Code requires CPAs to place the interest of the public first. To place the interest of the public first means that CPAs should not place themselves, their client or their employer’s interest above the public. Many business dilemmas involve managers, CPAs, and/or top management who have placed their interest above the public’s interest. An example of an accounting and business dilemma where the public interest was not placed first is Fannie Mae accounting scandal in 2001. Fannie Mae is the Federal National Mortgage Association, a government supported entity that assist lower and middle income Americans to buy homes. The Federal Home Loan Mortgage Corporation (Freddie Mac) also assists lower and Middle Americans to buy homes. Both supported entities gain special treatment and “aimed to increase home ownership by decreasing the cost for homeowners to borrow money.” In order for the entities to decrease the cost for homeowners to borrow money they purchased home mortgages from banks. The home mortgages are then guaranteed and then sold to investors. The treatment of the mortgages helped minimize the credit and interest risk. Fannie Mae “makes money by buying, guaranteeing, and...
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...circulation which will lower interest rates. If the Federal Reserve Banks sell T-Bills currency is taken out of circulation which in turn raises interest rates. Private banks use these base interest rates to then determine the amount of interest to charge its customers when they wish to borrow money in the form of personal loans, construction loans, building loans, and mortgages. If interest rates are high, mortgage rates will also be higher. The higher the rates the less likely consumers will apply for a mortgage to purchase a new home. The Federal Reserve also purchases mortgage-backed securities to provide support to the mortgage and housing markets and to improve conditions in financial markets. These purchases allow entities such as Freddie Mac and Fannie Mae to provide more mortgages to consumers (Burek, 2010). The U.S. Department of Treasury controls the value of the dollar which impacts the economy through inflation. The Treasury can affect the housing market through the sale of Treasury Bonds, T-Bills and Notes. The interest paid on these affect the fixed-interest mortgage rates. The lower the yield, the interest paid on the notes, the lower the fixed-interest mortgage rates (Amadeo 2010). The lower the rates the more willing consumers will be to make larger purchases such as buying a home. Interest rates will affect mortgage rates, housing...
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...Dodd-Frank Act and The Consumer Protection Agency. Finance 5000 Webster University Mr. Smith Patrick Overby Overby41@gmail.com/ 915-540-1267 Spring 2 2015 INTRODUCTION The Wall Street Reform and Consumer Protection Act or the Dodd-Frank Act was signed into law in 2010 due the financial collapse of the economy. It provided regulatory protection for the consumer and oversight on how banks issued loans. It provided a blueprint for how to approach to resolving the challenges that the financial markets can create. The framework of the law resembles The New Deal in the 1930s because of the Great Depression. The reforms implemented by the Dodd-Frank Act will have far-reaching effects on the financial system and our economy. The Dodd-Frank Act allows company stockholder to determine the type of compensation packages of that management receive. Businesses must create a committee to assess and decide the amount awarded to their leaders. There are myriad of viewpoints towards Dodd-Frank from the detractors and proponent of the law. Individuals who are against the law believe that it is inflexible and will hurt businesses. The supporters of the law understand that this will limit the power of the financial institution. Dodd-Frank Act In 2008, the country was going through one of the worst financial crisis in history that resembled the Great Depression of the 1930’s. It not only affected the U.S. but also threatened the total collapse of large financial institutions...
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...Example of Financial Illusion Introduction The emergence of an increasing number of ‘financial illusions’ in the current state of financial markets around the world casts doubts over the famous and widely accepted efficient market hypothesis. The efficient market hypothesis (EMH) indicates that, at any time, prices fully and instantaneously reflect all available relevant information on a particular stock or market (Fama, 1970). EMH also suggests that it is impossible to “beat the market” because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. Thus, according to the EMH, it is impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices because stocks are always traded at their fair value on stock exchanges. Another reason is because no one has access to information that is not already available to everyone else. One important characteristic of the EMH is its assumption that agents are rational. Rational agents is agents which has a clear preferences, models uncertainty via expected values, and always chooses to perform the action that results in the optimal outcome from all the feasible actions. Their actions depend on their preferences, their information of the current situation; which may come from past experiences, the actions, duties and obligations available and the estimated or actual benefits that the agents can get after the actions. In reality, however, agents are...
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...Queen and it’s written by Freddie Mercury who is the lead singer. The song consists of six sections: an intro, a ballade, a guitar solo, an opera, hard rock and an outro. The song changes a lot in its style, its tone and its tempo, which is very unusual for rock music. Therefore it’s one of the most known songs even today. After Freddie Mercury’s death in 1991 it became the number one on the charts for five weeks. The intro The song starts with a cappella harmonies and describes confusion between reality and fantasy. When the piano starts Freddie Mercury starts singing “easy come, easy go, little high, little low” which embraces the dreamy atmosphere. By the end of the intro the famous cross handed piano starts in the key of Bb. The ballade The lyrics starts with a guy who’s telling his mom that killed a man with a gun which he truly regrets and by doing so he’s ruined his life. He tells her to move on as if nothing really matters and perhaps he should take charge of his own life. When he mentions that it’s time for him to face to truth and he doesn’t want to die it’s almost as if someone else is going to be responsible for his life. He’s coming clean with the things he’s done in the past. In this section, where he confesses, the music has a kind of sad tune and we can feel how depressed he is. The piano still continues the same pattern throughout the first stanza but with some small changes. Disregarding the lyrics, one can easily hear Freddie Mercury’s voice getting...
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...generation. A bunch of us were singing in a bar recently! It seems like even if you don't like the tune, you still know the words -- even the word "Scaramouche". Even though it was released in 1975, Queen's Freddie Mercury started working on the song in 1968. The original title was "The Cowboy Song" (Chester, 2015). He carried in his head and on a lot of scraps of paper. According to Brian May, no demo was recorded (Savage, 2015). He also said that as a rock band, it was exciting to go full tilt. Brian didn't write that riff -- Freddie wrote it on piano. In the early to mid '70s, Progressive Rock was reaching its zenith with bands like Yes and Genesis. Queen had already embraced progressive rock as one of their many influences. "Bohemian Rhapsody" parodies many different elements of opera by using bombastic choruses, sarcastic recitative and distorted Italian operatic phraseology("Bohemian Rhapsody,"Wikipedia). An embryonic version of this style had already been utilized in Mercury's earlier compositions "My Fairy King" (1973) and "The March Of The Black Queen" (1974). Queen started the recording process on August 24th, 1975 after three weeks of rehearsal. During the recording, the band used a total of five studios. Brian May, Freddie Mercury and Roger Taylor reportedly sang their vocal parts repeatedly for 10 to 12 hours a day. Some sections featured 180 separate overdubs and it took another three...
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...were Monsiuer Loisel,Will you give everything to your wife ? yes or no ? why ? ( If I were Monsiuer Loisel I will not give everything because im trying the best I can but my wife still not contended . B. If you were Awiyao , will you leave your wife for culture? or will you leave culture for your wife ? ( I will leave my culture for my wife because she is my happiness and she is my everything . C. If you were Lumnay will you fight for your love? Or will you let go of your husband for culture ? ( if I were Lumnay I will fight for my love because culture is just a way of life , love is for lifetime so if we love each other I will choose love. III-What message/s can you get from the following songs? Explain. Anak by Freddie Aguilar ( We should love and love our mother and father because they sacrificed for us for a long time and we should listen to them because they know what’s best for us. ( Make it happen By Mariah Carey ( We should be strong all time because we don’t know what future brings so believe in your self have faith In God. ( Heal the World by Michael Jackson ( We should love our environment take care of them so that we will have a better place ( IV-What Lessons In Life Have You learned from the following narratives: A.The Prodigal Son ( Enjoy life but know your limitations , don’t be greedy and listen to your father. B.The Necklace ( Be contended for what you have. C.The Cask of Ammontilado ( revenge can be...
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...is the information on Fannie and Freddie, and why is the change important to the housing market First of all, to fully understand the importance of the two companies and their aid, you must thank them how to help the millions of people to become the owner. Fannie Mae and Freddie Mac do not lend money directly to individuals. Rather, they are meant to establish a regular flow of funds banks actual payment of housing loans. Buy lenders from mortgage lenders - commercial banks, savings institutions and credit unions - which in turn allows these institutions to make additional home loans. Fannie mae was established in 1938 during the administration of President franklin d. Roosevelt when millions of families can't afford to buy a home. Freddie MAC in 32 years later. In 2007, the two companies announced the total loss of less than $5.2 billion, according to a report to congress. Before that, they didn't released since 1982, the total losses. In order to prevent crushing blow the real estate market, the federal government rescued company. Fannie mae and Freddie MAC, the financial problem does not pose a risk, if you do not intend to sell your home quickly or you don't want to refinance. That's because you don't have to worry about mortgage rates. And does not affect your current mortgage, so you should continue to pay agreement. My concern is that we really do not know what the market will Fannie Mae and Freddie Mac did not do. We know that there...
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...One Night with Blue Note “One Night with Blue Note” directed by John Jopson is based on a jazz concert performed at The Town Hall in New York City on February 22, 1985. This film brings together some of the jazz legends associated with Blue Note over the years as well as some newly signed artists. The concert introduces more than 30 of the world’s most revered jazz musicians in the form of all-star bands and is considered by many to be one of the most important nights in jazz history. Some of the great jazz musicians we heard were Freddie Hubbard, Jackie McLean, Jimmy Smith, Woody Shaw, Walter Davis Jr., Michel Petrucciani Art Blakey, Stanley Turrentine, Joe Henderson, Grover Washington, Jr., and Tony Williams. My favorite artist in the film was Michel Petrucciani. He is not only a great talented pianist but an inspiration as well. Michel Petrucciani was born with osteogenesis imperfecta which is a genetic disease that causes brittle bones and short stature. He still became one of the most accomplished jazz pianists of his generation, despite having arms which caused him pain. I believe that he teaches us that anything is possible with hard work and dedication no matter how hard things may seem. Although I am not a big music fan, I feel this concert was worthwhile watching as well as listening too. At the end I am glad I watched this film because it allowed me to be more open minded to music and the different styles and forms. These people and countless more, and innumerable...
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...Manuel S. Enverga University Foundation College of arts and sciences Eu1103a Love, courtship, marriage Submitted by: Karol Jossephine Issa Magalona Velasco Bs- Economics - II Crazy Little Thing Called Love Written by Freddie Mercury in 1979, Settings: Thailand Character and characteristics: Mario maurer – chon Pimchanok lerwisetpibol – nam Sudarat budtporm- inn (teacher) Perawatch Herabutya - Phol (Teacher) Pijitra Siriwerapan - Aorn (Teacher) Acharanat Ariyaritwikol - Top Khachamach Promsaka Na Skolnakorn - Pin Puttipong Promsaka Na Sakolnakorn - Chon's Father Plot/summary; The ordinary 14 year old girl Nam is unattractive or in simple terms...ugly. But she's always been secretly in love with an older guy in grade 10 called Chon, the most popular student in high-school. He's hot, perfect and generous, and that's what makes girls go crazy about him, including Nam too. But she doesn't give up easily. She tries to do everything to make her get noticed by the boy she loves, in the hope of him turning around to look at her just one more time Can you still remember your first love? A Little Thing Called Love, First Love or more popularly known as "Crazy Little Thing Called Love" is a romantic Thai movie that can surely make you fall in love again... A movie that can bring back the memories of your sweet first love. A movie that will claim a lot of your tears. A movie that can make you smile... and laugh! A movie about life, love, friendship, loyalty...
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...Strengths and weaknesses of rations A ration is a fixed allowance on provisions on any product that is needed but has a shortage. Most Times rations have occurred wars and other catastrophic events that involved a mass reduction. A ration also can be seen in cases where something is in high demand but because the producer wants to be fair, they put a limit on what can be given. There are strengths and weaknesses to some degree in each situation that may occur due to a ration be orchestrated. Auctions are due to the sell of merchandise for buyers to bid on, for example Storage Company’s auction off a unit due to non payment. The strength in this as related to rations is that it is open to every one and it allows everyone to bid on it. The weakness is that there are only so many units and the ratio of people to units is scarce. Then there are the ration coupons the strength in these is that it allows a big number of consumers to have a chance at certain product. The weakness to this is that it limits what people can get, these coupons were mostly used during wars and these days grocery stores just put a limit on certain items rather than go through the trouble of issuing out a coupon. The term first come first serves have a long list of pro’s and cons. One important strength would be that it creates and urgency and depending on if there is a limit it allows consumer to take advantage of a great deal. The weakness is that when it is a first come first serve basis in rations...
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...Obama administration pushes banks to make home loans to people with weaker credit Now it is difficult for most of the Americans to get a home loan, because the banks are extremely cautious when they are considering offering a loan to someone due to the financial crisis of 2008. However, Recently, the Obama administration asks banks to make home loans to borrowers with weaker credits. They are doing this in order to help young people looking to buy their first homes and individuals with credit records weakened by the recession. And it is more important to promote the economic recovery. (Goldfarb, 2013) Administration officials are trying to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs. Federal Housing Administration and the Obama White House are working to develop new policies to make clear to banks that they will not face legal or financial recriminations if loans that conform to the program’s standards later default. Also, they are encouraging lenders to use more subjective judgment in determining whether to offer a loan, such as looking at a borrower’s overall savings. (Goldfarb, 2013) The skeptics argue that we should learn from recession in 2008. Risky lending will sow the seeds of other house bubble and credit crisis. Looking at the recession that happened in 2008, the primary reason of this recession was the house bubble, which led to credit crisis. There are several primary causes of the house bubble: (i) Low...
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...Beginning in 2008, mortgage companies had begun to start making loans to individuals as a way to promote home ownership. With the help of Fannie Mae and Freddie Mac, there was increased pressure on these mortgage companies to loan to individuals who did not meet certain requirements that would qualify them. For obvious reasons, these qualifications were in place so that a crisis like this would have never happened. Additionally, the mortgage backed securities and collateralized debt obligations attracted investors due to their high return on investment because of the higher interest rates charged to the mortgagor. When these subprime mortgages had defaulted, both the mortgage/lending and the investing sector crashed which led to the nations recession. As a result of the subprime mortgage crisis, mortgage loan originations have been at their lowest level since 2001. This is due to the tighter requirements needed to qualify individuals for mortgage loans. However on the other hand, foreclosure and delinquencies have increased enormously which, as an extension, has resulted in an increase in mortgage fraud aimed at distressed homeowners. However, as of 2010 the majority of the prevalent schemes per FBI Cases open were Loan Origination Schemes, followed by Title Escrow Settlement fraud, then Real Estate Investment, Short Sale, Commercial Real Estate Loan Fraud, and a few other categories. Loan Origination Schemes are divided into two main categories: fraud for property/housing...
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