Fannie and Freddie Will Fail!
Fannie and Freddie Will Fail! That comes straight from Dr. Mark Calabria, the Federal Housing Finance Director that oversees Fannie and Freddie!
In a prepared statement given to the US House of Representatives Committee on Financial Services, FHFA Director Mark Calabria did not hold back in his comments.
But in their current condition, Fannie Mae and Freddie Mac will fail in a downturn.
The testimony of Dr. Calabria before the US House of Representatives Committee on Financial Services was geared around affordable housing goals. Blame is given to local zoning, land use restrictions, environmental regulations, onerous building codes and permitting requirements. According to Dr, Calabria, these safety and soundness requirements are hurting lower income Americans.
Dr. Calabria goes on to state “Our affordability problems will not be solved until local governments remove these impediments that limit the supply of affordable housing in their communities.”
Is Dr. Calabria saying… yes Mr and Mrs Low Income American, go ahead, build that structure without proper engineering. We don’t care if it collapses and injures you or your neighbors. Please, install a smog creating heating system; breathing clean fresh air is not that important. Probably not, but one could certainly interpret it that way.
Now for some reality.
…credit risk has been rising in the loans purchased by the Enterprises in recent years, with some risk factors exceeding the levels observed in 2004, the pre-crisis year that is a useful comparison case to today. While average borrower credit scores are better today – 746 in the first half of 2019 compared to 706 in 2004 – the Enterprises’ shares of low down payment and high debt-to-income mortgages are now higher than in 2004. Among 2019 Enterprise loan acquisitions, 20 percent had down payments of 5 percent or less, nearly double the rate in 2004, and nearly 30 percent had high debt-to-income ratios (exceeding 43 percent) compared to 27 percent in 2004.
This pro-cyclical pattern of increasing mortgage risk harms first-time and lower-income borrowers. It makes it easier for them to buy homes beyond their means when the economy is strong, and harder to keep those homes when the economy is weak. More than a quarter of Enterprise acquisitions in the first half of 2019 were first-time buyer loans compared to just 10 percent in 2004.
Ironic that safety and soundness is being ignored and credit risk is rising.. Who would of thought?
See the entire testimony here or watch it below
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FNMA will fail (another tax payer bail out is coming) because idiots are in charge, now the FHFA wants to water down building codes. I wounder if they should just let Core”Logic” run everything, considering they have already taken over major elements of our industry. I just renewed my license for a two year term, I am not sure if it will be the last time or not. Some of these people need to move away from the home ownership is an entitlement mentality. No appraisals, desktop appraisals, lower FICO scores, 100% financing, now remove building codes, it never stops with these dimwits. Just give everybody a free home, free collage, free health insurance and free income and be done with it.
On Phil Crawford’s latest show, He was told in DC that within 12 months, 70% of loans will get an appraisal waiver. Waiver program is back on in a big way.
Yet to date NO ONE has sourced that rumor to a credible, or authoritative originator.
Stupidity has no limitations when it comes to all forms of leadership at the GSEs. This really applies to those managers and directors who oversee the appraisal policy and collateral departments. The collateral departments are made up of appraisers who could not make it in the field and sadly they are the ones promoting all these harmful policies such as bifurcation, waivers and UAD. Based on what we are seeing it is clear these departments are poorly run and guided by bad decision making. It is sad the future of our business is in the hands of morons who seek to destroy public trust and harm the consumer all in the name of profits. All the while our government sits back and watches consumers being taken advantage of. What happened to this country? Nobody is talking about broker commissions or the ridiculous fees charged by the lender, they are all focused on retaining as much of the appraiser fee as possible? We are the back stop to poor collateral decision making and the GSEs who have everything to gain when you remove appraiser? It’s obvious this is all a money grab and nothing else. Funny I just had a friend of mine show me his closing statement. Fannie approved a property inspection waiver yet still charge $500 for the waiver fee????????? My fee is $400 and you get a real appraisal completed by a real appraiser! I am shocked as to how many refinance assignments I have received where the borrower purchased the house within the past 12 months and now they are refinancing yet I cant even support the initial sales price????? You honestly cant make this up!!!! I pray to god people In our government read these posts because we are sounding the fraud, manipulation and deception alarm bell yet nobody is willing to listen. Appraisal need to be ordered on ever property insured by our tax dollars! There was nothing broken with the original appraisal process. The only thing broken are the minds manipulating the appraisal profession. Time to act is now!
Soilant green is Core Logic…..
Of the waivers and Hybrids – Oh, yeah, bring em on ! says Fannie and Fred. And what will happen is that the rats whose brain child these programs are, (stealing everyone’s cheese as in American taxpayers) who are running these programs at the GSEs – will just move on to other cushy jobs when the ships sink
Appraisal Waiver transactions are basically NoDoc Loan Version 3.0 (Ver 1 in S&L crash, Ver 2 in 2008 crash).