Posted on 09/02/2013 7:45:41 AM PDT by whitedog57
The mortgage giants, Fannie Mae and Freddie Mac, have certainly had their share of problems and controversies. Both are in conservatorship with the Federal Housing Finance Agency (FHFA) after suffering devastating losses. This comes after Fannie Mae and Freddie Mac denying they have a government guarantee, but were bailed out by the Federal government after all.
I never thought in a million years that Republicans, Democrats AND the Obama Administration would be on board with winding down the Democrat Darlings. But former Obama FHA Commissioner Dave Stevens summed it up nicely:
“There is a bipartisan effort here that’s thoughtful and it is without question the most thorough Congressional effort to draft a GSE reform legislation to date,” David Stevens, president and chief executive officer of the Mortgage Bankers Association, said in an interview.
Reform? Thoughtful?
Let’s see. Corker-Warner proposes shutting down a capable regulator, FHFA, and creates a new government insurance company: The Federal Mortgage Insurance Corporation. Given the Obama Administration’s and Congress’ disastrous attempt at “heathcare reform” and its implementation, I was wondering by everyone is so enamored with Corker-Warner since it is yet another herculean effort at “reform.”
Ah, here is the reason: the “protections” in the proposed Federal Mortgage Insurance Corporation in Corker-Warner have been scaled down to 90% with a minimum borrower down-payment of only 5% to gain political closure. Fannie Mae and Freddie Mac historically had private mortgage insurance coverage down to 75% and required a 20% cash down payment or private insurance. So, Corker-Warner is even WORSE than the risks posed by Fannie Mae and Freddie Mac!
As Kevin Villani, former Chief Economist at Freddie Mac) wrote, these protections under Coker-Warner are way too weak to actuarially price even with the proposed, but politically vulnerable 5% capital requirement.
So, all the stated reasons for GSE reform are pure twaddle. The REAL real reason for GSE reform is to WORSEN taxpayer exposure to mortgages losses.
Then why go through this charade? Why not just keep Fannie Mae and Freddie Mac in place and give them FHA down payment and credit score goals? Oh, the politicians want everyone to THINK they are doing something.
Like Obamacare, we now looking at GSE reform that potentially WORSENS taxpayer exposure to losses just like Obamacare worsens the lives for those that already have healthcare insurance.
The House’ PATH bill would actually lessen taxpayer exposure to mortgage losses.
And the affordable housing goals will remain in Corker-Warner, just as they did during the housing bubble and crash.
affordgoals
We are officially characters in the movie Idiocracy. “Pour more Brawndo on the mortgage market!”
idiocracy-luke-wilson
Corker was a serious mistake on the part of Tennessee voters.
On those voters' defense, they were dealing with yet one more Statist Republican chameleon.
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