Posted on 05/13/2019 5:09:28 AM PDT by reaganaut1
The gatekeepers of the American mortgage market are increasingly backing loans to borrowers who have heavy debt loads, highlighting questions about mortgage risk as policy makers debate ways to change the system.
Almost 30% of loans that mortgage giants Fannie Mae and Freddie Mac packaged into bonds last year went to home buyers whose total debt payments amounted to more than 43% of their incomes, according to an analysis by industry research group Inside Mortgage Finance. The share has nearly doubled since 2015. Data on other government mortgage programs also show an increase.
The backing of these loans opens up a debate about the government’s role in the housing market. Some say cheap, federally backed financing has made credit available for millions of borrowers who otherwise might not have had a shot at homeownership. Others say that more-indebted borrowers are riskier, and that their purchases may be accentuating a rise in home prices that in many areas has outstripped median incomes.
Those contrasting views are spilling into the open as policy makers once again try to overhaul the housing-finance system. Mark Calabria, the recently confirmed head of the Federal Housing Finance Agency, which oversees Fannie and Freddie, said he plans to prioritize addressing this issue, though he hasn’t said specifically what he wants to do. A White House memo on housing-finance reform, released in March, also mentions it.
An obscure half-decade-old rule made these mortgages to buyers with high debt possible. The temporary provision expires at the beginning of 2021, or, should it happen first, when Fannie and Freddie revert to private control, following government sponsorship after the housing crisis.
The rule’s phaseout could upend the market by prohibiting Fannie and Freddie from buying loans with debt-to-income ratios above 43%, some in the industry warn.
(Excerpt) Read more at wsj.com ...
A friend that does real estate sales told me that another bubble has already formed. Just a matter of time. He added that hedge funds bought up a lot of the inventories, at substantial discounts, that were being held by the big banks and lenders. Which is why it appeared that the housing inventories were/are so low, when in fact they’re just being held onto, by Wall St.
The loans that get bundled to mom and pop investors are the loans the banks don’t want to keep. Why is that hard to understand?
Stupid people tend to learn lessons twice. And we sure are stupid.
Freddie and Fannie caused the mortgage crises. They went bankrupt first. And they did it because congress had total control of them. The Fed and the Treasury and the appointed overseer of these two called them corrupt, fraudulent, and unstable back in 2004. But Barney Frank and Maxine Waters and other democrats as well as republicans defended and protected the two mortgage entities. For years the two government backed companies were the largest lobbyists in Washington. They were their own super-PAC spewing money into the campaign coffers of many politicians least of which was Barrack Obama who was not even on their committees.
An obscure half-decade-old rule made these mortgages to buyers with high debt possible. The temporary provision expires at the beginning of 2021, or, should it happen first, when Fannie and Freddie revert to private control, following government sponsorship after the housing crisis.
The rule’s phaseout could upend the market by prohibiting Fannie and Freddie from buying loans with debt-to-income ratios above 43%, some in the industry warn.
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Setting the stage for another 2008? The DemocRAT donor class hoping for another ‘RAT President like Hussein to “deal” with the crisis with yet another round of “quantitative easing” (printing many hundreds of billions of new dollars for that ‘RAT donor class to profit from).
So friggin’ predictable,
You can go to www.zillow.com and see how many homes are in foreclosure or pre-foreclosure. Example, I was looking at Porter Ranch, Calif and saw what looked like 1/3rd of the homes in pre-foreclosure. These are $900,000 and up homes.
Because saying no is RAAAAAACIST, apparently.
Correct. Here we go again.
They have been Advertising on the Radio everywhere for Liar Loans(stated income) for over 2 years now, just like before!!!
Fannie has announced plans to implement doing AVM (Automated Valuation Models) for loans vs doing appraisals in order to speed up the process and theoretically cut borrower costs.
Cuts out one more protection for the lender and borrower.
I miss Hydroshock
I did appraisals for a while in the late 90s, in Atlanta. At the time, could be a very dirty business, depending on who was borrowing the money and who they were borrowing it from.
So, under the AVM program, the $300-500 that someone would save, not getting an actual appraisal, is going to save those involved in the sale, money? Real money?
This is the kind of crap that gets us all in trouble. So, they’ll take tax records and previous sales, throw a house into some kind of equation and voila, that’s how much the place costs. Can’t see how anything could go wrong with that.
And here we go again!
My question is if there will be the massive infusions of trillions of government money to prop up the markets as Obama did, or will President Trump let the big fail and be broken up as they should have in 2008? Yes a painful approach but the lesson learned from that pain might prevent it from happening again.
“An obscure half-decade-old rule made these mortgages to buyers with high debt possible.”
This is nothing short of criminal.
“Some say cheap, federally backed financing has made credit available for millions of borrowers who otherwise might not have had a shot at homeownership.”
The road to hell...
Yes I agree. I was an underwriter in Atlanta for years and briefly worked as a forensic underwriter at Fannie Mae. I found the appraisal to be very important.
As far as the ratios go the normal qualifying ratios for an 81%-95% loan are 28% on the front and 36% on the back. When you drop to 80% loan to value the back ratio loosens up a lot because of the larger downpayment and the requirement for PMI goes away.
Fannie Mae looks at historical models. They underwrite for risk. Generally once you hit 20% or more down payment the rate of foreclosure drops significantly.
If they are purchasing 95% loans with 43% back ratios on first time home buyers then you have elevated risk.
Democrats started the backing loans to borrowers who have heavy debt loads in the name of we are helping you in truth when they lose the home the lender wins.
And the democrats scream banks are bad more of the 2 faced party.
I seem to recall at least one bank had a pet name for those fine investments...”toxic waste”.
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