Congress, Please…No More Cash for FNMA Clunkers!

Congress, Please…No More Cash for FNMA clunkers!

Congress, cut FNMA loose from conservatorship and let them sink or swim…

Every day I tend to agree more and more that we are facing an uphill battle against corporate America. Then I remember that as a former Marine, I’m supposed to be ‘ok’ with uphill battles. We make do with what we have, not necessarily what we want or need.

Add to this most, if not all of our Congress from both Senate and House. Some isolated exceptions but most either don’t care or encourage the weaknesses in the financial system for their own gain.

There is a reason Congress has such a low approval rating among Americans from both parties and independents. THEY EARNED IT!

Right now, literally in the past week, the financial regulatory system is akin to that partisan political car that was “driven into a ditch.” Yes, Congress hauled it back out and parked it on the side of the hilltop where various self interested parties have been banging and tapping away at it under the pretense of fixing it.

Last week FNMA learned that the car is still insured. So IF it goes in the ditch again they are completely covered!

Immediately after learning that, FNMA decided to announce two new policies:

  1. Trainees OR ‘unlicensed appraisers’ can now inspect property without supervisors (release the parking brake), even though several states do not allow trainees to inspect property, and some states do not even allow unlicensed individuals to call themselves appraisers. Go ahead and slip that transmission into neutral, will ya? and;
  2. From now on any loan with a collateral risk (CU) score of 2.5 or lower is exempt from FNMA post purchase audit/default buy back requirements related to collateral. Would ya mind just giving the car a little shove please…just to get it started?

While we have all been screaming to allow qualified trainees to do the unaccompanied inspections, this announcement was premature with no time given to allow states, appraisers or even The Appraisal Foundation (TAF), the Appraisal Standards Board (ASB), or the Appraisal Practices Board (APB) to offer any input. FNMA threw it out there and left the ‘system’ to fend for itself. Right repair technique for the FNMA-appraisal car, but some warning to the guys downhill would have been nice!

As for the 2.5 CU score waivers, what’s the problem FNMA? Not enough loan fraud going on under the current system? You needed to provide direct and significant inducement for loan fraud to be increased dramatically?

Read up on AMCs and their staff that are already telling loan officers HOW to manipulate the appraisal in order to obtain lower CU scores!

Congress, please…no more cash for FNMA clunkers! Cut FNMA loose from conservatorship and let them sink or swim on their own with a new law prohibiting bailing either them or their insurers and reinsurers out for any reason!

Then see if they park the damn thing on a hill with the brake off, out of gear and lean against it!

Michael Ford
Latest posts by Michael Ford (see all)
Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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7 Responses

    • for (Commercial Appraiser):

      Curtis, you aren’t supposed to be identifying yourself as an appraiser anymore, and especially not advertising yourself as one. CA OREA /BREA Case No.C20130614-04 and OAH No. 2015060734

      Readers in full disclosure, Curtis is the only ‘appraiser’ I strongly encouraged AGA to deny membership to, and to whom I suggested a good attorney rather than agreeing to try to intercede with regulators on his behalf. Accusations mean little, but actual findings of culpability, involving 11 cases? THAT is another matter all together.

      Even unions have to have standards.

  1. Baggins Baggins says:

    Dude, right to the point!  Ford you’re the man!  Agreed and could you please expand on the possible move towards privatization of FNMA and Freddie, per the current presidential administrations statements?  Will ‘honk if i’m paying your mortgage’ still be a valid statement?  I put a long comment in the last article which promoted trainees, just a minute ago.  What a great publication this is, that both sides can have a voice, that’s a rare journalistic integrity these days.

    I thought the premise had been that privatization would lead to better risk management practices.  Also I heard that some people have better success jump starting when jamming the transmission into drive at higher speeds.

    • Lol Bags!

      The devil is always in the details. Technically FNMA always was a ‘private’ entity…just one that never managed to cut its dependency. I don’t want to go into the weeds about AIG and French re-insurers (besides I don’t know how to spell Societe Generale or make those funny punctuation makers the name is supposed to have in it).

      Anyway, they became a GSE or the term was created especially for them.

      Here is the problem:

      1. FNMA is incompetently run.

      2. U.S. taxpayers have and will continue to subsidize risk that FNMA incurs as long as they are either a GSE OR the insured loan underwriters are considered too big to fail (Take a bow Hank-biggest damn theft in world history and no one goes to jail!).

      3. IF FNMA and Freddie are kicked to the curb with NO Uncle Sugar backstop, my bet is they will fail like Indy mac did.

      4. FNMA has learned NOTHING from past mistakes, except how to make better window dressing for their disastrously risky policies and actions.

      5. FHA and the VA or USDA can do everything FNMA is supposed to do. Freddie can be replaced by hard money lenders; or banks that take the time to relearn long forgotten prudent lending guidelines. Of course they will have to be portfolio loans OR pay MUCH higher mortgage insurance premiums because Uncle Sugar will NOT guarantee against insurers losses.

      So…yes. Honk if I’m paying your mortgage is still (indirectly) applicable

  2. Avatar Wayne says:

    I am no computer guru and I believe that statistics are very useful in many fields. Real estate is one of those areas where statistics can be confusing. Let’s say that the “research” says that home X should be worth XXX…However that computer cannot smell! A particular home has had a zillion dogs, cats, smokers, etc. The smell knocks the appraiser off the porch when the door is opened. These overpaid FNMA executives earn millions and expect you and I to bail their stupid ass out of the fire when they screw up…AND THEY SCREW UP EVERY DAMN DAY! Let’s get the tax dollars out of the picture….let the investors and the free market solve this problem! When an investor looses enough money they will catch on! NOT the problem of the tax payer!

  3. Avatar Ralph says:

    I do not see how you unwind FNMA or Freddie, Americans have been weaned a 30 yr fixed mortgage for decades and have gotten used to VERY LOW rates since 2008.  Joe six pack has a house, a car, both likely financed, his wife wants to go to the mall on Saturday and he wants to watch football on Sundays.  No way congress is going to upset THAT APPLE CART!

  4. Mike Ford Mike Ford says:

    Ralph your comment is extremely timely.

    Actually unwinding FNMA is pretty easy. Remember this simple fact; there is NOTHING that FNMA does that FHA does not already do. Surprisingly HUD/FHA even does it better! Between FHA and VA the FNMA loan limit transactions would not even be missed in the market.

    The higher Freddie Mac loan limits could require a special (new) category under FHA. VA already has a “25% Rule” that would cover them. Super Jumbos could always go back where they belong…private investment portfolios-NOT government sponsored, guaranteed or supported entities.


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Congress, Please…No More Cash for FNMA Clunkers!

by Michael Ford time to read: 2 min