We recently refinanced and after s month on the new loan, we got a letter saying our loan had been sold to Fannie May but there wasn’t going to be any paperwork other than the letter.
I’m pretty certain that 95+% of all home mortgage loans are resold to Fan or Fred. This allows the originator to get their money back and originate another loan.
There is nothing inherently wrong with this setup, it worked beautifully for 40 years. What went wrong was when FNM/FRE completely eliminated the standards for the loans they would buy. There used to be this thing called a “conforming” loan. That was a loan that 1: had 20% down, 2: could be serviced by no more than 33% (estimate) of the borrower’s verifiable income 3: on a properly appraised property in a non-insane market 4: loan being under $625K. (IIRC)
When I bought my first two homes, if I didn’t have 20% down, the seller had take back a second to bring the effective downpayment into line. I had to show the income. You didn’t have those things, you didn’t get the loan, period. If the loan pmt was 34% of your income, you flat out did not get the loan. “Conforming”.
For 40 years, this produced giant bundles of mortgage loans with well under a 1% default rate that institutions treated as “good as gold”. They pretty much were.
When in the early 200x era Fan and Fed decided they would buy any damned mortgage of any quality or no quality, it created a criminogenic environment which encouraged originators to make bogus loans because they knew FNM & FRE would buy them sight unseen.
That’s what did it. Anyway, this story has been told a billion times.
"What was that? (Scary music playing) Nothing. It was just the wind".
It’s part of what Donald Trump has been educating people about. It’s called a ‘carry trade’ as in the lender carries funds at near 0% or 0% from a member bank of the Federal Reserve who in turn obtains the funds at 0% or negative% from the Federal Reserve who in turn creates the funds at a computer.
The funds are carried to you to purchase a home and the mortgage note is carried (deposited or ‘sold’) to Fannie May while the ‘lender’ who carried the note to FNMA collects origination fees and a part of the revenue stream of interest.
Donald is upset with such carry traders because they offset their enormous revenues with prospective or fictitious debt or loans in preparation, so that they pay ridiculously low amounts of tax such as 5% to 10% and their incomes can approach $250 million per year. And these are often just individuals who are part of a club of ‘authorized’ persons.
So when he says he wants to raise taxes on the rich, that’s who he’s talking about.
Historically, you are expected to pay off your mortgage in 30 years, but today there are myriad arrangements and terms. Then after you pay off the note, you retire and expire, meaning pass away, then via probate tax policy your home is “returned to inventory” of the Federal Reserve banking system. But because retirees were moving to states such as Florida, laws were passed to allow retirees to sell their homes and claim a one-time exemption up to a limit. Hopefully, you will have a nest egg from your home.
There was a time when Americans actually owned their home in life and in death in the sense of passing home or farm to their families who inherited the home or farm without tax consequences but this was seen as allowing wealth to concentrate and was also counter to the profits that could be made by the Fed system. Basically in 1913 bankers were greenlighted to own everything in America by creating debt.
Hopefully, this gives you and others reading a view of the larger picture of home ownership and banking. It’s not a bad system entirely except when enormous booms and busts occur and they do occur, often by design. In such booms and bust there are financial actuarial firms that calculate with engineering accuracy for banks the fallout from busts, so much so that they know very much what will happen against life expectancies, default rates, foreclosure rates and so forth. They even have historical maps of where such events and incidents are likely to happen. There’s a big profit in such business and it’s rather disgusting as it wreaks havoc on lives and families. But the argument is that it’s better than communism which it is. Today you need not fear communism as much as its contemporary updated version “Cultural Marxism”. If you’re interested in politics and how your life is affected, how your life is expected to play out, then you’ll read a bit about it.