FRE/FNM have attempted to 'match' their revenues/profits over the expected time period of the mortgages/bonds/instruments involved. It's called 'smoothing' and it's been 'allowed' for some time by 'no objection' from their accountants and the regulators. However, with all the TYC B.S. (cost me most of my account last year), the World Com fiasco (missed that one though) and others, the accountants and regulators are 'nervous' because they want FRE/FNM (and others such as SLM) to better 'fit' their revenue/profit recognition models as used by traditional banks and brokers. FRE (and FNM) have opposed this move and this is the result - the regulators, with the accountants' support, have threatened to slap them. They (FNM/FRE) have been dragging their feet getting the work done, the formulas re-programmed and the expensive audits 're-done'. Unfortunately, it cost me over $16,000 today and who knows how much in the near future. Long term, I think it's NOT anything 'fraudulent' or 'illegal' or even unethical. Good-Luck anyway.
Babak: I read the article by Cliff Droke, and I guess I have to say "wow". I'm a mechanical engineer by training, and I know the math behind cycles is pretty well developed, but I have to tell you that basing investment decisions on "K Waves" is way "out there". In fact this kind of approach is getting close to using astrology as a method of timing markets. I've lived through and looked at the last several real estate cycles and always found that there easy to understand fundamental reasons why the real estate market does what it does. The "problem" with articles like this is that they combine a little bit of fact with a lot of fantasy. From a fundamental point of view it is hard to understand how the market can decline when interest rates continue to remain low, and liquidity it so high. Just one man's opinion. Thanks for the article reference. Steve46
I'm not making any predictions about what will happen, but I do see how the housing maket could drop with low interest rates. If employment does not pick up, or gets worse AND most people who want to/can afford to have bought a house, then demand drops. If people see a drop in house prices, they immediately become reluctant to buy, because, while the rates are great, who wants to be "underwater" next year, if you feel prices could drop more So people quit buying, retal markets are soft, and you CAN rent. A viscious cycle then feeds Not predicting it, just saying it can happend with low rates