FHA, Broke by Spring
Research for Online Investors

by John Dalt

11/25/09

T'was the day before Thanksgiving, and the house is full.  The girls are home from college, and our oldest that has started her first job after college is home for the weekend.

In the interest of marital harmony, and selfish reasons today’s letter will be short.

I read a few quotes from Bob Toll, co-founder and head of Toll Brothers the luxury homebuilder, about the Federal Housing Administration (FHA).  I wrote about the FHA last Monday in “FHA Issues CDS”.  It is nice to see a respected source repeating what I have already told you.

Mr. Toll says, “Yesterday’s subprime is today’s FHA.”  The FHA had 456,000 loans in default in September.  They are originating over 6,000 new loans every day, 400% more than in 2006  By issuing so many new loans; they are masking the problem loans because most don’t get in trouble the first year.

The former Chief Credit Officer for Fannie Mae from 1987 to 1989, Edward Pinto, predicted that FHA losses will wipe out their cash reserves.   I think you know who picks up the tab then!

FHA guaranteed loans are bundled as mortgage backed securities, like the Fed is buying, and sold through Ginnie Mae.  Bob Toll says, “It’s a train wreck and the flag will go up in the next couple of months.   Bail us out.  Give us more money.”

Oh boy.  It is good we have Turbo Tim and Maobama to take care of this.

The first National Thanksgiving in America was declared by President George Washington on Oct. 3, 1789 You can see the original document and read his worlds.  It begins, “Whereas it is the duty of all nations to acknowledge the Providence of Almighty God—to obey his will—to be grateful for his benefits—and humbly to implore his protection and favour.”

Have a blessed Thanksgiving.  We all have something to be thankful for.  I received an email last night that one of our dearest friends might not make it through the weekend, from liver cancer.

We all have challenges, we all face obstacles, but we all have many blessings.  There will be no MarketToday on Friday.  We will send Alerts to our premium service subscribers as required.  We must go with the wife and daughters to enjoy Black Friday.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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