Freddie Mac

Latest Gov’t. Refinancing Push: “It Doesn’t Look Like They’ve Done Anything Big Here”

by Ross Kaplan on November 17, 2011

More Hot Air From the White House

Is the White House finally getting serious about helping underwater homeowners refinance their mortgages?

Not judging by the bond market.

Yesterday, mortgage-backed securities issued by Fannie Mae and Freddie Mac jumped in price.

Given how refinancing affects these bonds — borrowers who re-finance pay off their expensive loans, reducing investors’ return — the price jump reflects skepticism that large numbers of homeowners will actually refinance in response to the White House’s latest push.

“There was a big fear that you’d see a big rise in prepayments, and, based on what [Fannie Mae and Freddie Mac] said, that has receded.  It doesn’t look like they’ve done anything big here.”

–Todd Abraham, co-head of the government-and mortgage-bond group at Federated Investors in Pittsburgh; The Wall Street Journal (11/17/2011)

So, there you have it.

Don’t listen to what the White House says.

Watch what the bond market does.

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“Congratulations!! You May Be Already be a [Mortgage Relief] Winner!”

by Ross Kaplan on November 4, 2011

Note the (Very) Fine Print

One of the sleazier come-on’s I’ve seen the last few years is a very official looking document — complete with a “Case Number” and Department of Housing and Urban Development (“HUD”) seal (right) – that begins like this (all italics theirs):

Dear [Home owner]:

Your home loan has gone under review for the Freddie Mac and Fannie Mae Relief Program.  This recent review may enable you to streamline your mortgage into a new 30 year fixed interest rate with a lower monthly payment.

The Freddie Mac and Fannie Mae Relief Programs are designed to provide customers with a more stable mortgage product while streamlining the underwriting process.  This process will reduce your monthly interest payment by $350.

The pitch goes on to recite some other benefits of refinancing, and closes with, “Please call our toll-free number and reference the customer number at the top of this letter to begin the restructure process.”

The letter is signed, “Sincerely, Loan Processing Department.”

False and Misleading Advertising

All of the foregoing would certainly suggest that some governmental entity is contacting you to inform you about some loan assistance program that you’re eligible for.

Which would certainly be nice, given the number and complexity of such programs (with new ones announced practically daily).

You can practically hear the consumer’s (aka mark’s) wheels turning:

Wow!  Maybe I qualify for one of those mortgage refinancing programs I’ve heard about.

And they already have a case number for me!

Which must be how they know how much I’ll save a month!

Unfortunately, the fine print at the bottom of the letter gives away the ruse:

“Licensed by the Department of Corporations; we are not sponsored by or affiliated with your lender, HUD, FHA, or any governmental agency.”

In fact, when you call the toll-free number, you reach something called “the Rate Reduction Department,” which is quickly followed by a phone call from Lending Tree — a very for-profit online lender.

Hey! Minnesota Attorney General!

Hey! Department of Housing and Urban Development, Federal Trade Commission, etc.!

How about dispatching a couple idle staff to shut these guys down?

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“HUD Home,” Defined

by Ross Kaplan on October 9, 2011

Wouldn’t That Make it an FHA Home??

If Realtors can’t keep it straight, I doubt non-professionals can, either.

So, for the record, a “HUD home” is a home that was financed by FHA, defaulted, and is now owned by the Department of Housing and Urban Development (by the time that happens, the lender has long since been paid off by FHA and is out of the picture).

That would be in contrast to Fannie Mae and Freddie Mac homes.

While the inventory of HUD homes in the Twin Cities is now under 300, that number is expected to double or even triple in the next 2-3 years.

The explanation?

FHA financing became much more popular beginning around 2007, as conventional financing dried up.

With continued weakness in both housing prices and the economy, the number of FHA borrowers who are defaulting is on the rise.

P.S.:  So, which of the five HUD keys opens the front door?

As every Realtor knows, it’s always the fifth and last one you try (of course).

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Wall Street – Washington Revolving Door: Spinnning Faster Than Ever

by Ross Kaplan on July 31, 2011

I Don’t Think It’s Got Anything to Do With “Learning”

What is the most dismaying thing about “Some Bankers Never Learn,” Gretchen Morgenson’s article documenting mortgage bankers’ efforts to sabotage legislation (Dodd-Frank) aimed at cleaning up lending standards?

It’s not the bankers disingenuously arguing that tighter standards will unfairly limit home ownership.

It’s not the bankers’ willful obliviousness to the hundreds of billions spent (so far) propping up Fannie Mae and Freddie Mac, which supposedly were all about “expanding home ownership” (and which Wall Street has conveniently cast as the scapegoat for its own role cratering the housing market and broader economy). 

No, the most depressing thing (to me) in Morgenson’s article is what David Stevens, the President of the Mortgage Bankers Association — and mouthpiece for the foregoing arguments — did for a living up until last March.

His former job?

Federal Housing Commissioner at the Department of Housing and Urban Development (“HUD”).

Do ‘ya think Mr. Stevens was an aggressive advocate for taxpayers and consumers in his former capacity at HUD?

Nah, me neither.

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Winston Churchill on “The Crash of ’08″

July 18, 2011

Whodunnit?  “Fannie Mae and Freddie Mac!” Never have so many owed so much to so few. –Winston Churchill If Winston Churchill had been alive to witness The Crash of ’08 and the events leading up to it, I think he would have offered an updated version of his famous observation about the Royal Air Force pilots who defended [...]

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The World’s Two Biggest Red Herrings

June 4, 2011

The Fannie and Freddie Sideshow What do you call two companies that have cumulatively lost tens of billions, are now wards of the state, and continue to receive multi-billion dollar government subsidies? If their names are “Fannie” and “Freddie,” the answer is:  the world’s two biggest red herrings. Or, if you prefer, a sideshow to [...]

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Things That Make Housing More Expensive

May 24, 2011

Real Estate Pop Quiz Quick, which of the following items make housing more expensive? A. Higher interest rates; B.  Limiting (or eliminating) the mortgage interest deduction; C.  Less capital for funding mortgages, due to a shrinking role played by Fannie Mae and Freddie Mac (the so-called Government-sponsored enterprises); D.  Requiring Buyers to put down 20%. [...]

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Biggest Threat to Housing?

March 24, 2011

Housing Multiple Choice What do local real estate insiders think is the biggest threat to housing prices prospectively? A.  The winding down of Fannie Mae and Freddie Mac. B.  A spike in mortgage rates. C.  Phasing out the mortgage interest deduction. D.  Imposing a tax on real estate commissions. *Answer:  C The above observation is [...]

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