CIGA Rusty Bayonet correctly points out the following:

This right now is phase two in the largest transfer of wealth in world economic history.

When it’s all done banking interests will own trillions in real estate and taxpayers will have compensated them for most of their losses on defaulted mortgages.

It makes you wonder if this ongoing crisis was by design or accident.

Citi to let distressed homeowners stay for 6 mos.
Citigroup plan lets homeowners avoid foreclosure, stay for 6 months if they turn over deed
By Alan Zibel, AP Real Estate Writer , On Thursday February 11, 2010, 12:27 am EST

WASHINGTON (AP) — Citigroup Inc. plans to let homeowners on the verge of foreclosure stay in their homes for six months — if they turn over the deed to their property.

Citi said Thursday it is launching the pilot program, dubbed "Foreclosure Alternatives," this week in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. Initially, about 1,000 homeowners are expected to participate. Citi may expand the program nationwide.

In a normal foreclosure, a lender assumes legal control of the property and evicts the homeowner. But Citi’s program, like other "deed in lieu of foreclosure" efforts, allows the homeowner to avoid a completed foreclosure. While the owner must still leave the home after six months, the program results in a less severe hit to the borrower’s credit score.

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Dear Jim,

I got a call this morning from a bank bond trader who alerted me to the following story in Bloomberg, telling us that Fannie and Freddie are buying up all mortgages currently in their pools 120 or more days past-due. The process and the math involved will probably bore the general public and so they will probably never get the true story, but here is the bottom line…

–The government’s balance sheet (through these two GSEs) is about to balloon even more, and my trader friend tells me the number of mortgages is significantly higher than most observers thought.

–If it is true that the Chinese are dumping their MBS, they just saw the bid drop another point or more.

–Fannie and Freddie will tout this as a way to not have to tap into the Treasury, but these loans were and still are headed for foreclosure.

The only advantage here is that they are more efficiently calling these in, eliminating the extra interest rate expense they had (which was guaranteed to the now-in-even-more-pain securities holders) on these non-performing loans. The result? They will now be financing a much, much larger inventory of delinquent mortgages at sub 1% rates.

And the MOPE is: Don’t worry be happy. All is well. Don’t you know? That’s why we pay those Fannie and Freddie executives the BIG bucks!

The Bloomberg article title gives a hint at more MOPE: "Fannie, Freddie Loan Purchases May Spur ‘Wad of Cash’," suggesting that the money taken from these pools will go back into the market and off-set the Feds end of MBS purchases. Uh humm. So I called a few portfolio managers. No, they are not planning on reinvesting into the mortgage market. As I suspected, they’re pissed off at just another erratic act of the government and its bankster henchmen.

CIGA Nick

Fannie, Freddie Loan Purchases May Spur ‘Wad of Cash’ (Update2)
By Jody Shenn

Feb. 11 (Bloomberg) — Fannie Mae and Freddie Mac’s plan to step up purchases of delinquent loans may boost prepayments on their securities to rates that in some cases would erase all of the debt within a year. Yields over government notes on some of their bonds fell to 17-year lows on speculation the move would lead to reinvestments in the mortgage market.

The constant prepayment rate, or CPR, for Freddie Mac’s 30- year fixed-rate securities with 6.5 percent coupons will likely surge by 70 this month under the plan released yesterday by the McLean, Virginia-based company, based on Bloomberg calculations. The measure, which was 17.2 last month, represents the share of the debt that would be retired in a year at the current pace.

Freddie Mac said yesterday that it would buy “substantially all” loans with payments late by 120 days or more from its securities in the next month. Fannie Mae said later that it will “increase significantly” its buyouts, setting a less aggressive timeline. The value of Freddie Mac’s delinquent loans is $70 billion, while Fannie Mae has $130 billion of the debt, according to Citigroup Inc. data.

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Long Bonds Midday Action
CIGA Eric

Today’s midday action warrants a brief comment.

This leveraged ETF is starting show aggressive buying or selling of the long end of the yield curve. A real effort was made to reverse the neckline the past few trading weeks, but it has held.

That which cannot break support with force, will reverse and attempt to break resistance with force. A short-term swing high and overhead gap have already been attacked on very good midday volume. We’ll have to wait and see how this close, but strong tape indicates force behind the move. The tape could be providing a preview of the action yet to come when more significant resistance is tested in the not too distant future.