Barack and Barney Look to Further Plunder Freddie and Fannie
By Larry Doyle on June 23, 2009 at 7:01 PM in Barney Frank, Current Affairs, Economy, Fannie Mae, Freddie Mac, Housing & Housing Crisis, Sense on Cents (Larry Doyle blog)
When a homeowner goes out without locking his doors and leaving some lights on, he is inviting trouble.
In a similar fashion, the American public should prepare itself for a continued plundering of the portfolios and balance sheets of Freddie Mac and Fannie Mae by our leading housing finance gurus, Barack Obama and Barney Frank.
The scene is already set for our dynamic duo to pile an ever increasing amount of risk onto these “wards of the state.” How so?
1. While Freddie and Fannie are very much the responsibility of Uncle Sam, their balance sheets are not technically on Uncle Sam’s roll. That ‘cover’ provides a convenient disguise, but the fact is these ‘foster children’ are now nothing more than receptacles for more of Uncle Sam’s risky undertakings.
2. Neither the media nor the political opposition truly call them on these financial charades.
We learn today that both Barack and Barney have grand visions to add more high risk loans at mispriced rates onto Freddie and Fannie’s books.
The Wall Street Journal offers, Changes Urged to Rules on Condo Loans:
Two Democratic lawmakers are calling on Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery.
In March, Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70% of the units have been sold, up from 51%. Fannie Mae also won’t purchase mortgages in buildings where 15% of owners are delinquent on condo association dues or where one owner has more than 10% of units, which the firm sees as signals that a building could run into financial trouble. Freddie Mac will implement similar policies next month.
In a letter to the chief executives of Fannie and Freddie, Reps. Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, and Anthony Weiner (D., N.Y.) warned that the 70% sales threshold “may be too onerous” and could lead condo buyers to shun new developments. The legislators asked the companies to “make appropriate adjustments” to their underwriting standards for condos.
What does Barney Frank truly know about housing finance? This assessment is an elongated statement similar in style to Frank’s now famous approach to sub-prime lending back in September, 2003. Barney proposed, “I want to roll the dice.” America crapped out on that roll. Now in the height of hypocrisy, Barney is still providing insights and recommendations on mortgage topics. What’s wrong with this picture?
Not to be outdone by his Democratic Congressional colleague, President Obama also has no problem plundering Freddie and Fannie via another redistribution program. Bloomberg highlights, Obama’s Mortgage Refinancing Program May Be Expanded:
Fannie Mae and Freddie Mac may get permission to begin refinancing mortgages with loan-to-value ratios above 105 percent as the Obama administration seeks to boost participation in its anti-foreclosure programs.
“We’re actively considering how to structure a program that makes sense over 105 percent,” Federal Housing Finance Agency Director James Lockhart said yesterday. He said a ratio of 125 percent “is a number” that’s on the table, though “not necessarily the number we’re going to end up with.”
Make no mistake, each of these programs would entail adding signifcant risk to Freddie and Fannie’s portfolios at rates not reflective of that risk. Who will pay for the higher than expected losses? American taxpayers.
Mispricing mortgage risks while trying to produce a citizenry that leads financially responsible lives are not consistent initiatives!
Throwing good money after bad is also no way to fix a financial hole.
Somebody please leave a light on and lock that door!!
LD
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I’m not a financial expert but I don’t understand how a loan-to-value on anything can be over 100%. That would seem to defy common sense.
Common sense? That’s what got Walpin illegally fired.
Yet another criminal act by Obama, at least one per day, along with pissing on the Constitution.
jus soli
jus sanguinus
the illegal usurper brings forth more destruction from within
Are they verifying income on these loans? Some lenders are not verifying income if the refinance is one of their own loans…up to 105% loan to value…..Really scary…..and the loans are guaranteed by Fannie and Freddie AKA us.
Two Harvard educated “useful idiots” on a course to self destruct.
Thanks LD. We are in a real mess.
I know I am eager to fund all sorts of risky ventures. Especially 125% mortgages about which I know nothing, and have no say in the purchase at all.
Would that enable people headed to foreclosure to refinance and then go about buying those fancy stainless steel appliances that they just must have also? Maybe they could also go on a cruise again by then getting another second mortgage since their home’s value would again get inflated.
What I’ve been hoping is for a correction in the market. The price of homes and condos became obscene. Everybody thought they were living in an investment that would one day make them rich. This would again result in the crazy flipping that got us in this mess in the first place. I’m sorry, but the people who spent insane amounts of money they couldn’t really afford on homes that were too big for them anyway should learn the lesson and not get rescued again. This doesn’t help the poor either. They are mostly renters with nowhere to go as they see their rents increase, lose their jobs and end up on the streets.
People who think, and don’t drink the cool kiddies beverage have to wonder how long and how much of this plundering the economy, which is all ready on life support, can stand before it just goes splat.
This is scary stuff and the media, for the most part is either bloviating about Orambo swatting a damn fly, or yukking it about at his cutesy jokes at some damn media dinner.
We are on our own folks.
This sounds about right. I got a call yesterday from BOA about a mortgage I have with them-used to be a Countrywide loan. The person offered me the opportunity to refinance with cash out and rolling all the closing costs into the new mortgage without any documentation. I asked her if that wasn’t setting the stage for another mortgage disaster and she said the government wants to reach out to as many people as possible to make our homes more “affordable”. If they go to 125% loan to value this is going to be just another way to suck more money out of American taxpayers pockets because many people are going to just stop paying those loans. The incentive to continue paying when the house isn’t worth what you’re paying on is pretty high when times are tough. The housing market is still in free fall and they’re increasing debt based on falling numbers?
I have a friend who is currently working as an auctioneer for a bank. He tells me there is such a mess internally that he sometimes goes two & three times to properties on the day of auction only to have the bank cancel at the last moment because of paperwork “irregularities”. He says many of the owners are staying in the properties for months without paying a dime and expect to be living there for many more months to come. We know who is paying for all this…
It seems Rep. Frank’s appetite for toxic assets is out of control. I wonder if he’s buddies with some unsuccessful condo developers? It would be interesting to get an update on the sources of political contributions he’s received.
As if I would believe anything Barney Frank had to say about financing in the housing market. Or much else. Turn off the lights and lock the door?
The crooks have already set up housekeeping, invited their friends and cooked up another all-night party.
We are so screwed. Yet, the band keeps playing and few seem to notice it’s a funeral dirge.
Thanks for the continued updates, Larry. Or should I say: continued horror story.
This is what you get when more than 50% of the voters are looters.
I think Barney Frank is a worthless piece of fat… He sits up there playing the holier then thou part when his gay partner took huge bonuses sitting in a high position at Fannie Mae… yet no one ever talks about that… LOL
HOWEVER, I’m a Real Estate investor/developer… and I will agree, that the rules do need to be loosened a bit on this particular issue! Just because a building is new shouldn’t penalize it in the mortgage sense! A person wishing to buy a new unit is having a harder time getting a loan. The issue is really with the person buying the unit (credit worthy) etc…
I can see having over runs at 105% LTV but that is really where it should end… although I do think it’s a good idea to be able to go a bit higher if you’re a credit worthy mortgage holder and you need help rolling two loans together to make one manageable payment. In the long run everyone wins… it keeps someone in a unit/helps them keep their A credit rating and also keeps property prices stable around the unit.