Here We Go Again – Obama & Democrats Push For Increase In The Worst Of Risky Mortgages

I can hardly believe it when I read it.

As we all know the were two things that created our current economic turmoil, reckless government spending that we couldn’t afford and reckless lending in the mortgage market.  The bad mortgages were then packaged and sold as investment securities destroying 401’s and bank accounts all over the world.

Every day you’ll hear about the need for more regulation – That simply isn’t so – what we need is less Government spending and an end to reckless mortgage lending.

Get ready for the next round of “sub-prime mortgages”, Obama and the Democarts want to “double down” and increase the number of “high risk” mortgages funded through Fannie Mae and Freddie Mac.

Freddie Mac and Fannie Mae were the first of the bailout babies – you and I and all of the other taxpayers in this Country have been gouged for about 7 Trillion dollars to buy up the earlier batch of “bad mortagges” these entities created.

So what is Fannie Mae and Freddie Mac up to now?

Obama Seeks To Refinance More Underwater Mortgages    

July 1, 2009 1:04 PM EDT

According to various reports, the Obama administration is stepping up their efforts to stem foreclosures and will start refinancing mortgages with a loan-to-value of as much as 125% through Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). The previous loan-to-value was 105%.
President Obama’s Making Home Affordable program sought to help up to 5 million mortgage holders refinance, but to date only 80,000 have been refinanced. (Sadly, of the 80,000, close to 50,000 have already  re-defaulted – what a failure). http://www.streetinsider.com/Economic+Data/Obama+Seeks+To+Refinance+More+Underwater+Mortgages/4767278.html
Consider this example – straight from the White House press release:
REFINANCING EXAMPLE
If your loan is held by Fannie Mae or Freddie Mac and you are current on your mortgage payments, you may be eligible to refinance your mortgage loan even if your LTV is up to 125%. LTV, or loan-to-value-ratio, is a measurement that compares the principal balance of your loan (the amount you currently owe) to the actual value of the house. For example, if your loan amount is $300,000 and the current value of your home is $240,000, your LTV is 300/240, or 125%. http://www.streetinsider.com/Economic+Data/FHFA+Releases+Details+Of+Plan+To+Allow+Refinances+Up+to+125%25+LTV/4767700.html
So, now the Government plans on leneding up to $300,000 on homes worth only $240,000. (Plesae note that the average price of a U.S. home this month is $178,000).
 
Where does this money come from – Your Tax Dollars.
 
For those of you who are asking, “So what does this mean?”, the answer is this. The Government will now fund mortgages to those who are underwater or indefault, with taxpayer funds, and allow the individuals to obtain loans that are, as the example above states, worth substantially more than the homes being mortgaged are worth.
 
The riskiest of all of the sub-prime mortgages were those made with no down payment and where the loan to value was above 80%. The very worst were the 125% LTV loans.  
 
Are you asking, and what happens when the person re-defaults in 6 months and walks away with the $60,000 above the home’s value? Answer – THE AMERICAN TAXPAYER IS ON THE HOOK FOR THE MORTGAGE.
 
This is a receipt for deepening the current crisis – not resolving it. 
 
The answer isn’t additional “regulation”. The Government is “regulating” that this be done.
 
The answer is in electing Politicians with an ounce of common sense.    

Countrywide Lawsuit Settled – Lender to Modify Mortgages In 11 States

 

Published: October 5, 2008
Countrywide Financial has agreed to the largest program ever to modify home loans, as part of a settlement with officials in 11 states, just days after the federal government adopted a giant financial rescue package without any relief for distressed homeowners.

Countrywide, the nation’s largest lender and loan servicer, recently acquired by Bank of America, had been sued by the states over what they said were predatory lending practices. To settle the suits, it will provide $8.4 billion in direct loan relief, affecting an estimated 400,000 borrowers nationwide, while waiving certain fees and setting aside additional funds to help people in foreclosure and relocating.

“Countrywide’s greed turned the American dream into a nightmare for thousands of Californians who now face foreclosure,” said Jerry Brown, the attorney general of California. He led the negotiations for the states with Lisa Madigan, the Illinois attorney general. “Our goal here is to help as many people stay in their homes as possible and get some compensation for those who have already been pushed out of their homes,” he said.

Mr. Brown expects loans worth $3.4 billion to be modified in California, where homeowners have been hit hard in the housing bust.

The Countrywide effort is the most comprehensive, mandatory loan workout program since the mortgage crisis began last year. Congress has proposed various programs, but those measures did not make it into the final $700 billion government bailout. Since taking control of Fannie and Freddie Mac, the two housing giants, the Federal Housing Finance Agency has said it is looking at expanding modifications on the loans that Fannie and Freddie own or guarantee.

After seizing IndyMac, the Federal Deposit Insurance Corporation began a loan modification program that it said could be a template in other takeovers. The agency hopes to help tens of thousands of borrowers whose interest rates are being reset higher in the early stages of that program.

It is encouraging people who have fallen severely behind on their payments or who have defaulted to switch into a fixed-rate mortgage at current rates of about 6 percent. Countrywide has made pledges before to modify large swaths of loans. Late last year, it vowed to help about 82,000 borrowers who were facing higher payments through 2008. But the new program will be mandatory and will be monitored by state officials.

Along with the direct relief, Countrywide will waive late fees of $79 million and prepayment penalties of $56 million and suspend foreclosures on delinquent borrowers with the riskiest loans.

A foreclosure relief fund will be created with $150 million from Countrywide to help borrowers who are four months or more behind on their payments or whose homes have already been foreclosed on. The company will also provide $70 million to help troubled borrowers relocate to rental housing. In all, Countrywide is setting aside $8.7 billion to help borrowers.

A Bank of America spokesman, James E. Mahoney, said that the cost of the program had been anticipated by the company in its acquisition of Countrywide.

“We have worked with attorneys general across the country to resolve the issues relating to Countrywide’s practices,” Mr. Mahoney said. “Bank of America has put our own leadership in charge of Countrywide and have committed to a very different set of business practices going forward.”

Countrywide settled with the states without admitting any wrongdoing.

Under the terms of the settlement, Countrywide will reduce principal balances in some cases and cut interest rates in others. Rates could decline to 2.5 percent, depending upon a borrower’s ability to pay, and remain at that level for five years. Then the rate will adjust to prevailing interest rates charged by Fannie Mae on its fixed-rate mortgages.

The program will focus on borrowers who were placed in the riskiest loans, including adjustable-rate mortgages whose interest rates reset significantly several years after the loans were made. Pay-option mortgages, under which a borrower must pay only a small fraction of the interest and principal, thereby allowing the loan balance to increase, are also included in the modifications.

Borrowers whose first payment was due between Jan. 1, 2004, and Dec. 31, 2007, can participate. The loan balance must be at least 75 percent of the current value of the home, and the borrower must be able to afford the adjusted monthly payments.

“We have created the first comprehensive, mandatory loan-modification program with the largest loan servicer in the country, and it is going to help homeowners stay in their homes,” Ms. Madigan said. “We will use this model when we work with other servicers as well.” She said that approximately $185 million worth of loans in Illinois would be modified under the settlement.

Illinois had accused Countrywide of relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like its “no closing costs loan.” Countrywide also created incentives for its employees and brokers to sell questionable loans by paying them more on such sales, the complaint said. In reviewing one Illinois mortgage broker’s sales of Countrywide loans, the complaint said the “vast majority of the loans had inflated income, almost all without the borrower’s knowledge.”

Other states in the settlement are Arizona, Connecticut, Florida, Iowa, Michigan, North Carolina, Ohio, Texas and Washington. It is the largest predatory lending settlement in history, far exceeding the $484 million deal struck in 2002 with the Household Finance Corporation.

“This agreement demonstrates the effectiveness of states in addressing predatory lending and other consumer protection matters, proving states should not be pre-empted by federal legislation,” said Mr. Brown.

The program will be administered by state officials who will examine regular reports from Bank of America. The program will begin Dec. 1 as Bank of America contacts borrowers. In the meantime, Bank of America said Countrywide customers can call 800-669-6607 to discuss their loans.

The terms of the settlement do not address Angelo R. Mozilo, the former chief executive of Countrywide Financial, or David E. Sambol, the company’s former president. The states had included both as defendants. Mr. Brown said he would pursue litigation against both men. Neither could be reached for comment.

http://www.nytimes.com/2008/10/06/business/06countrywide.html?_r=1&ref=business&oref=slogin

What? Fannie And Freddie May Not Sell Bad Mortgagaes After All?

Regulator says Fannie, Freddie might sell bad assets

By John Poirier

Reuters
Sunday, October 5, 2008; 2:43 PM

WASHINGTON (Reuters) – Fannie Mae (FNM.N) and Freddie Mac (FRE.N) may sell some bad assets to the Treasury Department but a decision has not yet been made, the regulator of the two mortgage finance companies said on Sunday.

“They are financial institutions that could sell assets,” James Lockhart, director of the Federal Housing Finance Agency, said during a C-SPAN television interview. “Whether they will or not certainly the decision has not been made.”

Lockhart estimated that between 2 percent and 4 percent of Fannie and Freddie’s assets are bad mortgages.

On Friday, President George W. Bush signed into law a $700 billion bailout package for the U.S. financial industry aimed at allowing Treasury to buy soured assets from institutions that have stopped lending to each other as well as individuals and businesses.

The two government-sponsored enterprises, which were seized by the government in early September, own or guarantee almost half of the country’s $12 trillion in outstanding home mortgage debt.

The first asset sale under the Treasury program is not expected to take place for at least four weeks, sources familiar with the financial rescue plan said on Friday.

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/05/AR2008100501056.html

VIDEO: O’Reilly vs Frank – The Fannie & Freddie Collapse – Barney Frank denies everything

VIDEO: The Bailout & Fannie Mae – FOLLOW THE MONEY

VIDEO: Why Fannie Mae Reform Failed – THE MOVIE

WATCH THE ACTUAL COMMITTEE TESTIMONY – WHY REGULATION REFORM FOR FANNIE AND FREDDIE WAS BLOCKED

Shocking Video Proof – Bush/McCain Deregulation Is To Blame

The following Articles describe the role of “political ideology” in the Financial Crisis – How Politics fueled the crisis:

Professor Stan Liebowitz: The Real Scandal – http://www.nypost.com/seven/02052008/postopinion/opedcolumnists/the_real_scandal_243911.htm?page=0

Professor Thomas J DiLorenzo: The CRA Scam and its Defenders: http://www.mises.org/story/2963

John R Lott, Jr : Analysis – Reckless Mortgages Brought Financial Market To Its Knees http://www.foxnews.com/story/0,2933,424945,00.html

BUSH/McCAIN – No, I didn’t see them on the Video either!

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