Refinancing mortgage? Maybe you don’t need that appraisal after all

Editor’s Note:  The Fed is doing everything in its power to maintain the real estate bubble in order to maintain demand- by lowering credit score requirements, offering lower down payments (1 to 3%), and now removing the lender’s responsibility for home valuations.  What could go wrong?

http://www.miamiherald.com/news/business/real-estate-news/article157002859.html

New products could increase the number of investors shorting U.S. home loans

A sluggish mortgage-bond market could be jump-started by a new service that allows investors to short home loans.

Skeptics say the rise of derivatives on credit-risk transfer notes sold by Fannie Mae and Freddie Mac has echoes of the 2008 credit crisis, when the market plunged under the weight of collapsing subprime securities.

Fannie and Freddie – the biggest guarantors of U.S. home loans –  started transferring mortgage-default risk to bond funds and other investors in 2013 to help reduce risks to taxpayers according to Bloomberg. But the program has been generating more traction in recent months, after New York-based Vista Capital Advisors rolled out a pilot program that would eventually allow investors to bet on U.S. homeowner defaults.

Craig Phillips, a former BlackRock executive serving as head of financial markets advisory and client solutions for the Treasury Department, said credit-risk transfers will be core to U.S. housing policy.

The madness begins again with creative new derivatives and credit risk transfers that put the risk on the taxpayer.

Fannie, Freddie cut mortgage modification interest rate for first time in 2017

After four months of leaving the benchmark interest rate for standard mortgage modifications (not including HAMP mods) at an 18-month high, Fannie Mae and Freddie Mac recently announced that they are cutting the benchmark rate.

Back in January, Fannie and Freddie increased the standard mortgage modification benchmark rate from 3.875% to 4.25%. That level is the highest the benchmark rate has been since July 2015.

Now, Fannie and Freddie are cutting the benchmark rate slightly, but leaving it above 4%. The government-sponsored enterprises announced last week that they are cutting the benchmark rate to 4.125%.

The January hike marked the second straight month of an increase, after Fannie and Freddie dropped the benchmark rate throughout 2016, progressively decreasing it below 4%.

The increases also came after the GSEs dropped the standard mortgage modification benchmark interest rate to the lowest level ever, 3.5%, in August 2016.

Then, the GSEs increased the benchmark rate from 3.5% to 3.875% in December, before hiking it well above 4% in January.

And now, they’re cutting it back a bit.

The benchmark rate tracks with prevailing market rates, and the most recent data from Freddie Mac shows that interest rates have generally been the decline (with some slight modulation) over the last several months.

The standard modification program is “designed to help those borrowers who are ineligible for the Home Affordable Modification Program.”

According to the GSEs, the standard modification program is “designed to help those borrowers who are ineligible for the Home Affordable Modification Program.

Therefore, the new rate does not extend to HAMP borrowers.

The new 4.125% interest rate took effect on May 12, 2017.

CitiBank Whisteblower Richard Bowen: They’re Back! Fannie and Freddie Ride Again

By Richard Bowen

http://www.richardmbowen.com/theyre-back-fannie-and-freddie-ride-again/

It looks as if Fannie Mae and Freddie Mac have not learned from their previous enabling of banks leading to the financial crisis. In fact, it looks as if the two are still using the same business model; they are lowering even further their underwriting standards to allow loans to be underwritten, ignoring student, credit card and auto loans supposedly “paid by others.” Didn’t this kind of tactic fail before? 

Their creativity now extends to former college students who are so heavily burdened with student and other debt, so why not excuse the debt? Why not change the rules and allow mortgage lenders to ignore the debt that would prevent many students out of school to not be able to buy homes, cars, etc? Why not put them into more debt, not less and oh, by the way, maybe cripple the economy as they helped do before?!

Fannie Mae has just released new rules allowing millennial borrowers to exclude student loans, credit cards and auto loans that are “paid by someone else” when they are applying for a new mortgage. To further incent, taxpayer subsidized mortgage loans can also now be used to repay student debt.

According to Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae, ”We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution, …. These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”

And, ironically, the person in charge of cleaning up these Wall Street rules is Craig S. Phillips, a former top executive on Morgan Stanley’s trading desk, who is now in charge to head up the effort to reform the Government-Sponsored Entities, Fannie Mae and Freddie Mac. At Morgan Stanley, Mr. Phillips headed a division that sold billions of dollars of toxic mortgages and mortgage-backed securities to Fannie, Freddie, and others.

Just this last April, Gretchen Morgenson of the New York Times wrote in an article that Mr. Phillips, then  leader of Morgan Stanley’s mortgage desk during the peak mortgage-mania years of 2004 and 2005, ran the operation that bundled loans and sold them to the two government-sponsored enterprises and many others. The loans blew up, the government sued Morgan Stanley and Mr. Phillips was a named defendant in the initial case — a case that resulted in the firm paying a $1.25 billion settlement. 

Discussing the financial crisis in December 2008 at the National Press Club, Phillips said he felt terrible about the level of government support of the financial system at that time, but government actions such as injecting capital were “critical because we can’t have systematic failure and a breakdown in all markets.” 

As I commented in a recent article, before the 2008 debacle the push was on to make housing affordable for everyone, and Congress gave directives to loosen the underwriting standards. And, although this was certainly one of the reasons Fannie and Freddie had such catastrophic losses, I strongly believe that the primary reason Fannie and Freddie had the huge losses was that they purchased many, many mortgages which did not even meet that lowered bar of creditworthiness. That is, they did not review the individual mortgages purchased but relied almost solely upon false certifications by the large bank sellers that the mortgages sold met the published standards. 

It was a perfect storm: a lack of controls, the implicit guarantee the government would stand by the loan, and the assumption that the institutions doing the lending wouldn’t go under and were providing true certifications. No one was checking. It was a circus! And still continues to be one!

The more mortgages were purchased, the more incentives went straight to Fannie and Freddie and their executives, until their collapse, when they were bailed out and placed into conservatorshipThen, in a move some have described as nationalizing the entities, the US Treasury started taking all of their profits, thus ensuring they would never be able to rebuild a capital base.

Our country is now faced with the dilemma of what to do with Fannie and Freddie. Should they be recapitalized and returned to private ownership, or should another path more favorable to the large banks be followed?

What to do with Fannie and Freddie is a huge decision now facing President Trump’s administration. Bad enough we’re encouraging – read enabling, those who may not be able to afford more debt to do so. Yet to appoint someone with Mr. Phillips’ less than clean hands to make this decision is a travesty.

H.R. 1694 Passes: Fannie and Freddie Open Records Act of 2017

Homeowners start preparing your Fannie and Freddie FOIA requests.  A brief window to submit your request may occur prior to the GSEs being privatized again.

Last week H.R. 1694  passed in the House of Representatives.

This bill will make Fannie Mae and Freddie Mac subject to the requirements of the Freedom of Information Act, which would make their records available to the public on request.

The Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) are government-sponsored enterprises (private corporations with federal charters that confer special privileges) that buy mortgages from lenders and either hold those mortgages in their portfolios or package the loans into mortgage-backed securities that may be sold.

To stabilize the housing market in the aftershock of the financial crisis, the Federal Housing Finance Agency (FHFA) used its authority in 2008 to place Fannie Mae and Freddie Mac into its conservatorship. In conservatorship, the government takes control of a failing financial institution with the goal of returning it to financial health and stockholder control. Well into their eighth year in conservatorship, they have operated under government control for longer than initially expected.

The Freedom of Information Act (FOIA; 5 U.S.C. §552) allows any person—individual or corporate, citizen or not—to request and obtain existing, identifiable, and unpublished agency records on any topic. Pursuant to FOIA, the public has presumptive access to agency records unless the material falls within any of FOIA’s nine categories of exception. Disputes over the release of records requested pursuant to FOIA can be appealed administratively, resolved through mediation, or heard in court.

Source: Republican Policy Committee

FannieGate: Obamacare Looting Scheme by diverting Fannie and Freddie Funds

Steve Mnuchin stated Monday on Fox News that President Obama engineered the “Net Worth Sweep” (NWS) in August 2012 to divert funds from the two Government Sponsored Entities (GSEs) to pay for Obamacare, after Congress refused to fund the low-income insurance subsidies critical to keep afloat the Affordable Care Act (ACA).

“There is a Twitter conversation going on, and it has been going on for some time, about how President Obama needed money for Obamacare and he took from Fannie and Freddie. Is that true?” Bartiromo asked Mnuchin.

“It is true,” Mnuchin replied.

“They [the Obama administration] used the profits of Fannie and Freddie to pay for other parts of the government while they kept taxpayers at risk,” Mnuchin answered.

An examination of the Treasury Department’s balance sheet for Fiscal Year 2013 documented how the Obama administration diverted billions of dollars into Obamacare that Treasury confiscated from Freddie and Fannie earnings.

On Aug. 17, 2012, the Obama administration amendment the Treasury Department’s Senior Preferred Stock Agreements with Fannie and Freddie that deprived private and institutional investors of their legally due dividend payments.

This enabled the Obama Treasury Department to confiscate billions of dollars in Fannie and Freddie earnings, in what is known as the “Net Worth Sweep,” or NWS.

The point is Congress never funded any taxpayer funds to pay the low-income insurance subsidies that are at the core of making the ACA work.

Section 1402 of the ACA – is written to provide federal subsidies to insurance companies for insurance purchased on state insurance exchanges to cover the difference between the capped maximum a low-income purchaser could be expected to pay and the amount the insurance cost.

Without funds provided by Congress to pay the low-income insurance subsidies under 1402, Obamacare would have collapsed immediately.

On May 12, 2016, U.S. District Judge Rosemary Collyer, in the case U.S. House of Representatives v. Burwell, ruled against Health and Human Services Secretary Sylvia Matthews Burwell.

Judge Collyer decided HHS Secretary Burwell had no constitutional authority to divert funds Congress appropriated to one section of the ACA to fund Obamacare subsidy payments to insurers under another section of the ACA, Section 1402 – the clause defining the insurer subsidies – when Congress specifically declined to appropriate any funds to Section 1402 for paying the insurance subsidy.

“Paying out Section 1402 reimbursements without an appropriation thus violates the Constitution,” Judge Collyer concluded.

“Congress authorized reduced cost sharing but did not appropriate monies for it, in the Fiscal Year 2014 budget or since,” she stressed.

The Obama administration appealed the District Court decision in U.S. House of Representatives v. Burwell to the U.S. Circuit Court of Appeals, deciding on its own authority that federal funds could continue to be diverted from other budgetary purposes to continue paying the insurance subsidies as long as the case was under appeal.

If the Trump administration wants to end Obamacare, all that is necessary is to drop the Circuit Court appeal in Burwell, and the result the District Court decision would become established law.

By dropping the appeal, the Trump administration would rule out any further diversion of federal funds to pay the ACA insurance subsidies, and Obama care would implode.

Mnuchin: GSEs Won’t Stay ‘As-is’ for Long

  http://www.themreport.com/daily-dose/05-01-2017/mnuchin-gses-wont-stay-long

Fannie Mae and Freddie Mac should prepare for change—and sooner rather than later. According to Steven Mnuchin, the Trump administration won’t keep the status quo for long.

Mnuchin discussed the GSEs and housing reform in general as part of an interview with reporter Maria Bartiromo on Fox Business’ “Mornings with Maria” on Monday. Though he didn’t go into too much detail, he did say that privatizing the two Enterprises wasn’t necessarily the plan.

“I haven’t said they’d be privatized,” Mnuchin said. “What I have said is I’m committed to housing reform. We’re committed to not leaving them as-is for the next four years.”

The main goal of reforming the system? Mnuchin said its to keep housing affordable without putting American taxpayers in harm’s way.

“We want to make sure that there is ample credit for housing,” Mnuchin told Bartiromo. “It’s a very, very important part of the economy, but we also want to make sure we don’t put the taxpayers at risk. And as you know, those two companies only exist because we have a giant line from the Treasury that supports them.”

Mnuchin also talked briefly about a recent bill introduced by Kevin McCarthy in the House that aims to eliminate Fannie and Freddie’s exemption from the Freedom of Information Act. This Act, according to Bartiromo, allowed the Obama administration to reallocate GSE funds toward other parts of the government—including the Affordable Care Act—without public knowledge.

“They used the profits of Fannie and Freddie for other parts of the government, while they kept taxpayers at risk,” Mnuchin said.

Bartiromo and Mnuchin also covered the recently proposed tax plan, which aims to lower taxes on middle-income earners and businesses. To see the full interview, visit FoxBusiness.com.

The Trump administration has been making waves in the housing and financial services industries as of late. Two weeks ago, President Trump issued two executive orders, calling for a review of “too big to fail” as well as oversight of these organizations.

Mnuchin also came out in support of the Financial CHOICE Act last week, which is proposed as an alternative to the controversial Dodd-Frank Act.

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