Thursday, September 4, 2014

comment I found on web: fannie mae

3/14/2014 2:10 PM CDT
While getting the taxpayer out of the business of guaranteeing mortgages may seem like a praisworthy goal, it's important to remember 2 things: 1) it was the subprime mortgages and Alt A mortgages that really drained the coffers and created the need for TARP- Fannie and Freddie's underwriting guidleines have always been relatively conservative (no stated income, fico's below 600, etc) and 2) the housuing recovery is now very dependent on these two quasi private institutions to continue reestablishing many families wealth. My concern is that these Rand Paul, small gov't type legislators that want to see Fannie and Freddie unfriended by the taxpayer, are blurring the lines between the role that Fan and Fred actually played in the mortgage meltdown when clearly it was market created by the big, private banks for subprime, alt A loans that was primarily responsible. Fannie and Freddie lost money, yes, as all players in the mortgage arena did after the meltdown, but they didn't precipitate the crisis like the private banks did.  
For example: Various mortgage companies that my associates and I worked with up until late 2007 wrote thousands of World (World - Wachovia), Countrywide (B of A), and Washington Mutual toxic Option ARM loans in the Bay area and expensive enclaves in the Southland that, in retrospect, were most likely to implode. Wamu option arm for example- 100% Wamu financing through a 90/10, with 580 minimum credit, stated income stated asset. All private loans. I can't speak to what went on in Orange County, the former subprime epicenter, but I hear it's much worse.  
Fannie and Freddie are not the issue. They are actually generating a very positive cash flow and have been very instrumental in our housing recovery. It's the small gov't cadre of lawmakers who want to blurr the lines, ride the hype and throw out the baby with the bathwater.

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