Fannie’s ‘Equity’ Plan: The Drinking Game
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One type of parlor game relies on players’ ability to maintain their memory, logic and articulation – all while getting blotto. These alcohol-fueled “think and drink” games are highly challenging. Even Britain’s royal family engages in such diversions if Netflix’s “The Crown” is to be believed. The games have names like “Bizz Buzz,” “Ibble Dibble,” “Never Have I Ever” and “Roman Numerals.”
Real estate analysts, drowning in a vat of impenetrable gibberish generated by mortgage giants Fannie Mae and Freddie Mac, are increasingly in a state of crapulence. These valuators haunt public houses and thirst parlors as they contemplate the ideological potions they are being forced to swallow unmoderated. A new drinking game promises to make sense of it all.
Warning: The game robs players of brain cells before they begin imbibing. In fact, the worst thing a player can do for brain health would be to play this game without a drink in hand.
From “redlining” to “equity-based lending,” Fannie Mae – the oldest of the twins – has spent most of its checkered 80-plus years tailoring access to capital based on the color of a borrower’s skin. An immediate step toward ending racial division in America would be to simply abolish it and its younger sibling, Freddie Mac. Although the game hasn’t officially started, pour a stiff drink and take your first swig. “Yamas!” as they say in the back-alley tavernas of Athens.
Late last year, the Biden administration ordered Fannie and Freddie to develop housing “equity” plans. The results are in and they promise to give borrowers money for down payments in accordance with their race, lower interest rates for buyers with bad credit scores on the basis of race, and hand out free money to certain homeowners for home repairs or to substitute for “disruptions to income” – you guessed it – based on race. Drink. Kanpai! as parched businessmen in hotel lounges in Hokkaido Prefecture can be heard to call out as they power-wash desiccated tonsils. Kanpai! Kanpai!
In March, Vice President Kamala Harris unveiled a plan to compel home appraisers to increase their valuations of properties perceived to be owned by people of certain races while sidelining other borrowers whose races or cultures are not currently in favor. Doing so would put appraisers in violation of 42 U.S.C. 3605. With a twinkle of gallows humor in your eye, raise your glass and drink. Skål as the mead-swilling Norsemen once saluted feats of derring-do.
Now open Fannie Mae’s “Equitable Housing Finance Plan.” You can find it here.
With the document open, drink at the first mention of “equity” — a foggy notion denoting the coercive reapportioning of resources from one group to another based on racial or cultural generalities.
What makes equity so invidious as a governing tenet is that it involves not just helping people of one racial or cultural group but it has the effect of knocking struggling members of disfavored groups out of the game. As midnight revelers say in the pubs of Rotterdam, “Proost!” Take a drink.
Take a drink for Mark Calabria, the former director of the Federal Housing Finance Agency. He was able to effectively rein in Freddie and Fannie during his all-too-brief tenure. The federal agency, known more commonly by its acronym “FHFA,” provides oversight for the twin blobs. But on President Biden’s first day on the job, the president signed an executive order to make racial equity a top priority for every single branch of the federal government. This included the FHFA. Calabria is now gone. Feel the burn as the elixir hits bottom – Kapow!
Take a drink at the first mention of “valuation modernization,” code for Fannie’s dogged efforts over many years to keep appraisers from inspecting the properties they appraise. Bottoms up to the use of so-called “black boxes” to replace appraisers. We remember the flawed black boxes developed by S&P, Moody’s and Fitch to value mortgage-backed securities and collateralized debt obligations. They turned securities filled with toxic mortgages into investment-grade vehicles that were then purchased by pension funds. As they say in the landlocked Czech Republic: Na zdravi!
At the first mention of “affordable housing,” take a drink. Fannie and Freddie’s last big push for a?ordable housing began during the Clinton years. The move turned moderates into binge drinkers. The government-backed behemoths then crashed the U.S. housing market in 2008 by lowering down payment requirements and gutting underwriting standards. By June of that year, the blobs had acquired 16.5 million Alt-A, negative-amortizing, subprime or otherwise toxic mortgages, with a principal amount of $2.5 trillion. The resultant collapse was the worst financial crisis since the Great Depression.
Bottoms up at the first mention of “Special Purpose Credit Programs.” These vehicles will increase access to credit and encourage sustainable homeownership for only some borrowers – you guessed it – based on race. The practice is prohibited by U.S. law. “Gun bae!” as they say in Seoul.
Appraisers are also being pressured by Fannie and its allies in Congress to abandon the venerable sales comparison approach to value and its bedrock principle of substitution. Drink to the death of this once useful analytical tool! (Take two swigs if you’re wearing a Che Guevara T-shirt.)
Drink to the full faith and credit of the U.S. government, as it supports Fannie in helping only certain individuals, based on generalities, “deal with unexpected expenses and repairs, or temporary disruptions to income.” It implies Fannie will now be involved in running a social welfare program.
Drink at the first mention of The Fair Housing Act and the Equal Credit Opportunity Act. Somehow, these two pillars guaranteeing equality no longer matter.
Drink at the first mention of “climate.” Nearly destroying the U.S. economy in 2008, Fannie now seeks to help create climate resiliency plans based on the racial makeup of neighborhoods. The incompetent mortgage giant won’t be solving climate issues anytime soon. Count on it. Through beer goggles and jaundiced bumbershoots, take a drink. J sveikata – that’s Lithuanian for “cheers.”
Fannie and Freddie have been the source of significant taxpayer risk since their founding. As long as these government-sponsored enterprises are allowed to exist in their current form, it will be a sword of Damocles permanently hanging over the head of the U.S. economy.
Please drink responsibly.