Friday, January 25, 2008
Are Voters STOOOPID?
Both Fannie and FHA will go to DTIs of over 60% in some cases. Especially refis. Try this thread on FHA. If only I had saved down the 100 odd links or so I've run into over the last year about how brokers were getting loans that the subprime companies refused (who have since defaulted) through under FNMA!!! The reason they did it as a last resort was only because FNMA paid less for the loan. FNMA is already going to run into huge problems because of the slopover into their portfolio in the interim between most of the subprime lenders going down and FNMA's meaningful tightening of lending standards. So FNMA already faces years of worsening financial trouble without any new risks. Why does OFHEO oppose this? Hmmmm?
You can get information on Fannie's loan types at efanniemae.com. Believe me, they do high LTV, hybrids, 40 year etc. This page will show you information about Fannie's ARM products. Take a look. Take a good look. You want a 100% interest-only? They got it!! In fact, they'll take downpayment assistance, and go up to 105% with special programs. Chortle! Ya want interest-only ARM hybrids with DAP? Sure. BRING IT ON, cries Fannie. Simultaneous seconds? Sure 'nuff!!! (By the way, this is the escape from the refusal of the MI companies to play.)
The bottom line is that every risk afflicting Alt-A lenders in high-cost areas can afflict Fannie and really has. It's just that no one is paying attention. The Streamlined Refinance (applying currently only to Fannie or other GSE mortgages) alone should make your hair stand on end and you sell FNMA stock if you have any. You can roll these over with 1.5% of the qualifying payment with no verification of income, job, etc. Sound familiar? It's lending practices that matter, not who practices lending.
And FHA? It will either largely refuse to participate or it will go bust. FNMA can easily go bust too. It probably will. I assure you that Pelosi does not care either way. A huge number of the Congress Critters don't care.
This is for only one purpose, and that's to bail out some large banks and some large developers. Don't think that the developers won't immediately set up Beazer-style captive mortgage groups or affiliate with an outfit like CW to unload their inventory. Don't think that the developers won't offer their own downpayment assistance programs (DAP) just like Beazer did. Don't think the results won't be just as bad!!!
Nothing's been fixed, guys. The only thing that has occurred to date is that the market noticed that these loans were defaulting at scary rates, so now the theory is that we can shove all this off to the government-guaranteed entities because private business won't do it any more. Now it will be the taxpayers' problem. This is crazier than anything I have ever heard of.
See Tanta here, here and here.
What is this 'Reality"? I WANNA! I WANNA! I WANNA!
And if I Don't Get What I WANNA, SOMEBODY HAS TO PAY! (Sic the Homeowners Association on the Traitors and Thought-Criminals who dared to sell for less and Brought Down MY Property Values!!!!!)
I live in SoCal. We're going to see three-year-olds in sexually-active adult bodies crapping their diapers and SCREAMING for BAILOUT! And PAYBACK!
It's going to be a great time to be a Tort Lawyer.
Mucking about with the rules on Fannie and Freddie are the last things we should do (after all, the GSEs have enough balance sheet trouble as it is!), but the central motivation of political figures is to DO SOMETHING ... even if it is wrong, and will actively make things worse.
I disagree with headless unicorn guy though. This will be a terrible time to be a tort lawyer. All that work to bring the case to trial, only to find out that the person you sued is bankrupt and that you'll only collect a few pennies on the dollar of that judgement ... not even enough to cover the lawyer's expenses.