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).
Consider this example – straight from the White House press release:
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%.
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.    

“Subprime lending is back with a vengeance” – Government Programs Behind New Wave of Reckless Lending

Just when you thought it was safe to go back in the water… Subprime lending has come roaring back.

But this time, reckless financial innovation isn’t being hatched on Wall Street. Instead, state governments are angling to “monetize” first-time homebuyer tax credits so borrowers can purchase homes with little or no money down.

If this sounds eerily similar to the type of lending practices that got us into this mess, well, it should.

The federal government, as part of the recently passed economic stimulus package, will refund first-time homebuyers up to $8,000 if they meet certain eligibility requirements. The program is frequently cited as one of the myriad reasons a bottom in the housing market is imminent.

Critics, however, argue that rebates don’t end up in a buyer’s pockets until his or her 2009 tax returns are filed – even though rebates are credits, not just deductions.

Homebuilders like Pulte Home (PHM), Lennar (LEN) and KB Home (KBH), along with their lobbying arm, the National Association of Homebuilders, have thrown their full weight behind the rebate program, but say it still doesn’t go far enough.

In an effort to boost home buying — even for marginally qualified borrowersa number of states are finding creative ways to advance the tax credit to buyers on the day they get their new keys, rather than having to wait for next year’s refund check. This allows buyers to pay for things like closing costs, mortgage points – or even the down payment.

States are employing schemes whereby they offer prospective buyers low or no-interest loans for the amount of the tax credit, due upon of receipt of their money from Uncle Sam. If the borrower doesn’t make good, the loan becomes a junior lien on the property, with an interest rate that is far from usurious – usually just a bit over the prime lending rate. Missouri was the first state to launch such a program, and has since been joined by Delaware, New Mexico, Pennsylvania, Tennessee and others. States are even lobbying the IRS to deposit the refunds directly to the states, rather than to the home buyers, in order to circumvent non-payment. The IRS, for its part, “is reviewing” this idea.

In Washington, the state Housing Finance Commission runs a tax credit bridge-loan program, which it hopes will grow in the coming months. Not surprisingly, local real-estate professionals are behind the initiative. Washington Association of Realtors president Bill Riley told the San Francisco Chronicle he believes around half of would-be first-time buyers in his state “cannot save enough money for the down payment and closing costs.”

Exactly. That’s the point. This is precisely what differentiates a “would-be” home buyer and a home buyer. And that’s the way it should be.

If the federal government wants to subsidize home ownership, fine. It’s already proven unwilling to learn the lessons of Fannie Mae (FNM) and Freddie Mac (FRE) about the costs of jamming borrowers into homes they can’t afford. But these rebates should at least be limited to borrowers that meet even the most modest requirements to buy a home in a responsible manner.

The Federal Housing Administration — another vehicle for government-backed mortgages where taxpayers bear all the risk — gives out loans that require borrowers to post a meager 3% down payment. If a “would-be” homeowner cannot scrape together this amount of cash, that person should rent and save their pennies. They should not receive a no-interest loan from the state government. This is not discrimination, this is not redlining, its common sense.

In a rush to prop up home prices and delay the ultimate day of reckoning for the vast majority of US real-estate markets, the federal government — and now state governments as well — insist on coercing taxpayers to over-leverage themselves and take on a debt burden they cannot truly afford.

From the looks of it, Washington is leading by example.

Top Stocks blogging partner Todd Harrison is founder & CEO of This post was written by Minyanville Contributor Scott Andrew Jeffery.

McAuleys’ World: Once again the Government is behind these activities … just how short can our collective memory be …….

The Mortgage Foreclosure Crisis – The Truth Behind The Numbers

I’m sure you’ve seen the following headline or heard the “sound bite” over your radio or from your local news anchor, “Record 1-in-10 Americans in mortgage trouble”. Before we examine this sad statistic, we should note that 9 out of 10 homeowners are not “in trouble”.

Exactly what do the authors of this article have to say, well consider this, “The Mortgage Bankers Association said Friday the percentage of loans at least a month overdue or in foreclosure was up from 9.2 percent in the April-June quarter”. Please note 2 items, the article does not state how much of an increase has taken place since the April to June quarter, nor do the authors note that 9.2% would, in fact, represent  1 in 10 home owners.

What is not being discussed is this fact, “[The] delinquency rates for traditional 30-year fixed rate loans made to borrowers with strong credit loans rose to 3.35 percent in September from 3.07 percent at the end of June.”

The 30 year historical default rate for 30 year fixed mortgages is 3.2 percent. The 30 year “fixed” mortgage has always been referred to as a “traditional mortgage”. It was not until the advent of LIAR LOANS and NINJA Mortgages that this country saw the development of the “Sub-prime” market. The authors of this article imply that “strong credit” is required for a 30 year fixed rate mortgage, for most of the last 75 years one has had to simply prove an ability to “repay” ones mortgage and to have saved a “down payment” to qualify.        

Two out of every three mortgages currently “in trouble” are of the “sub-prime” variety. A “sub-prime” mortgage is 700% more likely to go into “default” or “foreclosure” that a “traditional mortgage”.  

Once again the pundits have the “cart before the horse”. The economy is being ruined by the reckless lending practices created by the Government when it forced LIAR & NINJA loans on the banking community. The percent of “traditional mortgages” that end up  “in trouble” or “default” or “foreclosure” has not changed substantially over the last 50 years.

The mortgage crisis is centered on the “sub-prime” mortgage market. The “sub-prime market is responsible for 2 out of 3 “defaults” or “foreclosures”. Many of these sub-prime mortgages were given to people who should not have received them in the first place.

If we are not truthful about the cause of our problems, we will never correct our mistakes ……….

I Wasn’t Kidding – NINJA & LIAR Loans Are Still Around – Former Treasury Sec’y O’Neill says “NO MORE SUBPRIME MORTGAGES!”

Former Treasury Sec’y O’Neill says “NO MORE SUBPRIME MORTGAGES!”

By Liz Claman

Can’t put down 20% for a house? TOO BAD, you’re on your own now. Former Treasury Secretary Paul O’Neill joined me on “Countdown to the Closing Bell” exclusively today to talk about a myriad of issues. He has some controversial thoughts on tax hikes for BOTH the rich AND poor, whether the U.S. Auto Industry should be bailed out, and why no one should be issued a subprime mortgage loan anymore.

O’Neill says we all need ‘tough love’ to get us out of this mess.  Please watch all three clips.  Whether you agree with him, here are some fascinating ideas from Paul O’Neill.


%d bloggers like this: