A return to sub-prime - Fannie and Freddie

[vinoveri]

Un-freakin-believable...


Feb. 5 (Bloomberg) -- Fannie Mae, the mortgage-finance company under U.S. government control, will loosen rules for homeowners seeking to lower their loan payments by refinancing.
Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases, according to a notice yesterday to lenders posted on the Washington-based company’s Web site. The changes apply to loans that the company owns or guarantees.
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While Fannie Mae, smaller rival Freddie Mac and the companies’ regulator are considering permitting borrowers to refinance even when the consumers owe more than their homes’ worth, they also must consider “the various hurdles and unintended consequences,” Federal Housing Finance Agency Director James Lockhart said in a Feb. 2 interview.

Fannie Mae’s changes will include allowing borrowers seeking to take out a loan that is 80 percent of the value of the home or less to qualify for refinancing with credit scores below its 580 minimum. Consumer credit scores as measured by Fair Isaac Corp. range from 300 to 850.
Easing Documentation

The program also lowers income-documentation requirements to one current pay stub, according to the notice.
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http://www.bloomberg.com/apps/news?p...gQ4&refer=home

[Slimprofits]

Re: A return to sub-prime - Fannie and Freddie

The spending bill, TARP II, Markopolos, the $15,000 tax credit for first time home buyers and now this. I've reached an anger tipping point. Puked out? No, I'm pitchfork ready.

The program also lowers income-documentation requirements to one current pay stub, according to the notice.

It is easy to forge one, a little harder to forge many.

[strittmatter]

Re: A return to sub-prime - Fannie and Freddie

The spending bill, TARP II, Markopolos, the $15,000 tax credit for first time home buyers and now this. I've reached an anger tipping point. Puked out? No, I'm pitchfork ready.



It is easy to forge one, a little harder to forge many.

My overall attitude these days - I'm getting shorter and shorter with folks. Headaches more frequent. You can notice a tension uptick on itulip lately.

Forrest?

Ya Bubba?

I jis wanna go home.

[Spartacus]

Re: A return to sub-prime - Fannie and Freddie

are there any specific breeds of pooch that eat their own feces more than any other?

We should start calling Freddy/Fanny by that breed's name.

[we_are_toast]

Re: A return to sub-prime - Fannie and Freddie

And what would be wrong with this?

These are refinances, not original mortgages.

Those who could afford to make their payments, now will have more disposable income. Those who couldn't, might now be able to and prevent a foreclosure. Some of the nations debt obligations will now be absorbed by MBS holders.

Less foreclosures, less debt, more disposable income. I'm not seeing the problem here.

[Spartacus]

Re: A return to sub-prime - Fannie and Freddie

from what I've read to date it sounds wrong from both ends.

for F & F it seems wrong to me because apparently subprime refis are ending up in the toilet within weeks.

For the borrower it's even worse (I don't know if this applies to these refis) because when you refinance the mortgage is switched to a non-recourse[*] mortgage. These people can walk away now, but F & F want to get them into loans that will hobble them for the rest of their lives.

This is no metaphorical alabatross or stigmata - it's a wolverine with its teeth sunk into your viscera.
[*] I may be calling it the wrong thing. Non-dischargeable in bankruptcy.

And hat would be wrong with this?

These are refinances, not original mortgages.

Those who could afford to make their payments, now will have more disposable income. Those who couldn't, might now be able to and prevent a foreclosure. Some of the nations debt obligations will now be absorbed by MBS holders.

Less foreclosures, less debt, more disposable income. I'm not seeing the problem here.

[The Outback Oracle]

Re: A return to sub-prime - Fannie and Freddie

Toast, I'd have thought that one of the really serious problems you have was the application of standards to loans being made. There was no proper documentation of income, realistic valuations, assessment of ability to repay, assessment of existing debt lavels etc.
Everyone from your president to the local lost dog has been decrying the lack of proper oversight on everything and everyone.
Yet here you have your biggest, and GOVERNMENT OWNED, mortgage lenders DELIBERATELY promoting lying again.
It's not that people might be able to refinance and it may help them. But at some stage for god's sake, do the refinance based on proper documentation and on a realistic assessment of their ability to meet the requirements of the loan.

[we_are_toast]

Re: A return to sub-prime - Fannie and Freddie

Toast, I'd have thought that one of the really serious problems you have was the application of standards to loans being made. There was no proper documentation of income, realistic valuations, assessment of ability to repay, assessment of existing debt lavels etc.
Everyone from your president to the local lost dog has been decrying the lack of proper oversight on everything and everyone.
Yet here you have your biggest, and GOVERNMENT OWNED, mortgage lenders DELIBERATELY promoting lying again.
It's not that people might be able to refinance and it may help them. But at some stage for god's sake, do the refinance based on proper documentation and on a realistic assessment of their ability to meet the requirements of the loan.

Outback: Yes, I see your point. If the Government was promoting lying, I would be very much opposed to it. But I didn't get that impression from the article. My take was the government was simply trying to drop all obstacles that would prevent some existing, probably risky, mortgages from being refinanced to lower interest rates. There would be no increase in danger of default since the existing mortgages have higher monthly payments and there would be a reduced number of foreclosures since monthly payments would drop. The financial status of the applicant isn't really relative. If they can't make the lower refinanced payments, they most certainly can't make the higher existing payments.

but F & F want to get them into loans that will hobble them for the rest of their lives

This wasn't clear from the article. If they can stay in the house for the time being, cram-downs and possibly debt forgiveness may be a future option that beats a foreclosure today.

[mesyn191]

Re: A return to sub-prime - Fannie and Freddie

Refinancing the interest rates won't do anything though since rates aren't the problem, the principal is. Remember, many if not most of the people who bought homes these last few years only "qualified" based on the teaser rate of their POA/ARM. As low as a gov. backed loan will be it won't beat that teaser rate by much if at all. These people will go into default anyways, but now the debt will be non-recourse so they won't be able to get away from it.

If they really wanted people to stay in these homes they'd just force major cram downs on the principal, but then that would force a revaluation of huge amounts of debt...