Help Wanted: Leaky Dam Finger Plugger Guy

Good news!  In spite of going through the wash-rinse-repeat cycle of loss recognition-equity writedown-beg for taxpayer money as “capital” so many times they’re folliclly challenged, Freddie Mac (FRE) is hiring.  The bad news?  The “in demand” jobs are in their appropriately named Default Asset Management division, or DAM.  I love the irony.  Like a dam ready to burst, well, just read this from the description of the department:

Default Asset Management careers at Freddie Mac put you in the department responsible for developing and implementing effective loss mitigation, foreclosure prevention, REO disposition and capital recovery strategies and practices that enable Freddie Mac to mitigate and manage credit losses. In Default Asset Management (DAM), your job is important to Freddie Mac’s efforts in support of Making Home Affordable and our classic workout programs to help preserve homeownership and support our housing mission. Default Asset Management also partners with national and local authorities, its servicers, and non-profit housing counselors to support borrower education and outreach efforts on foreclosure avoidance and sustainable homeownership.

Let’s be honest: the frequent use of words like “mitigate”, “avoidance”, “foreclosure”, and “prevention” tells me your job is going to be extremely difficult.

Why? Because it will be obvious from Day 1 on the job that the people you will be dealing with really need to be foreclosed on, the properties auctioned off, charge-offs taken, and write-downs to the company’s capital need to be taken and reported.  In short, you will probably want to fix bayonets and bayonet the critically wounded on the battlefield of the mortgage/credit downturn.

That’s what should be going on and for all intensive purposes, but if you read what the department’s purpose is, it’s to do the opposite.  Beg, plead, twist arms, and possibly cry to keep people in their homes even though they’ve missed payments for at least 90 days or they’re so far upside down on the loan their kids will inherit mortgage principal payments along with that family heirloom.

I should take this time to mention you won’t hear me referring to these events as a “disruption” or a “crisis.”  It’s not that I don’t appreciate what has happened, I just don’t see it as an anomaly.  I see it as the backside of the housing boom in the earlier part of the decade and it was both predictable and avoidable.

At any rate, that’s your job.  Plug the leaky dam even though water has been cascading everywhere for years and the dam is already broken.

But hey, it’s a job.  It might be the consumer lending equivalent of repeatedly banging your head into the wall expecting it not to hurt, but it has a steady check from Uncle Sam.

And somebody has to do it.  But what Freddie shouldn’t be doing is originating any new loan purchases or doing any securitizations it intends to hold on to.  They need to be put in receivership, and the portfolio should be in runoff mode.  When that’s done, the case for GSEs should be shut and never opened again.

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