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[Ulisses Pereira]

"Where the Real Housing Loan Pain Lies"

By Jim Cramer
RealMoney.com Columnist
4/11/2007 11:07 AM EDT

"Why is the real estate story so hard to fathom? Why do we think that things are either going to implode or be fine?

Two reasons: government entities and big mortgage companies.

Let me explain. Every time we hear on TV that there's no money to lend, we see the ads that support that programming. And the ads are from Greenlight or Ditech or Lending Tree. They make it clear that there's still tons of financing out there.

Second, if Fannie Mae (FNM - commentary - Cramer's Take) or Freddie Mac (FRE - commentary - Cramer's Take) wanted to make this whole problem go away, they could just agree to securitize a whole bunch of bad loans and package them with their own credit behind them.

Now, there will be purists who say, "Jim, you don't understand the charter of Fannie Mae." To which I would say, "Here's the charter: What does Congress want?"

I have no doubt that there will be belly-up homebuilders. I have no doubt that the subprime lenders that are left and that trade in the single digits may not make it.

But I also know that other than the low-income immigrants who do not speak English -- there are many of them -- and those who can't calculate monthly payments and don't know how to negotiate with their lenders -- there will be lots of redos of deals.

The biggest problem is the latter issue. As someone who had his loan sold out from underneath him, I can say that it is virtually impossible to speak to a human about your mortgage and any problems, and I am a rich American.

What do you do if you are a poor immigrant or someone who doesn't understand the impact of rates?

That's the bread basket of pain. That's why I believe that a nationwide agency like Fannie Mae can still help, and it is such a bleeding-heart agency when the Democrats are in charge that it will find a way to help us.

Meanwhile, the Fed isn't oblivious. It's watching.

And it will act, even if no one believes me. The hawkish comments, the worries about inflation -- it might as well be Oct. 3, 1998, when the Fed was extremely hawkish. A week later, it called an emergency meeting to cut rates in 10 days. Heaven forbid someone besides me remembers that."

(in www.realmoney.com)