Skip to comments.Fannie and Freddie Use Their “Get Out Of Jail Free” Card for Some Borrowers
Posted on 01/28/2013 6:34:00 AM PST by whitedog57
Fannie Mae and Freddie Mac, the mortgage giants in conservatorship, played their Get out of jail free card and are letting some borrowers wipe out negative equity on their homes.
Fannie Mae and Freddie Mac will let some borrowers who kept up payments as their homes lost value erase their debts by giving up the properties, helping Americans escape underwater loans while adding to losses at the mortgage giants bailed out with $190 billion of taxpayer money.
Non-delinquent borrowers with illness, job changes or other reasons they need to move will become eligible in March to apply for a so-called deed-in-lieu transaction that erases the shortfall between a propertys value and the size of its mortgage. It follows a change in November that lets on-time borrowers sell properties for less than they owe, known as short sales, wiping out the remaining mortgage debt. Normally, the lenders could pursue people to recoup their losses.
Unlike loan modifications where borrower might have to go 90 days late to demonstrate financial distress, underwater borrowers must be current to apply for a write down. As Raphael Bostic, the Assistant Secretary of HUD for Policy, said Those who did not walk away from obligations are worthy of government thanks, and help. I would argue that I dont want the government determining who is worthy of government thanks.
So why did the FHFA Acting Director Ed DeMarco allow this to happen? The answer lies in the FHFA report on principal writedowns. That study showed that Fannie and Freddie could save about $3.6 billion more than current loss-mitigation approaches by reducing balances for some borrowers who owe much more than their homes are worth.
I agree with Kent Baker on second homes. I never understood why Fannie Mae and Freddie Mac purchased/insured second or vacation homes. Hopefully, those arent covered in this principal writedown move.
We shall see how this will works in terms of Fannie Mae, Freddie Mac and TAXPAYER losses. This will likely incite a bigger push for non-GSE entities such as banks and investors to do the same.
This is starting to look like the board game Monopoly, but with the government as the only player.
Or the people who refused to buy more a house than they thought they could afford.
Or what about the people who would like to buy a house and have been prudent in saving their money. They get to pay more money into a system that will take more money from them to essentially give money to someone else who made a bad decision.
When is the average American going to get fed up with this?
HERE'S HOW THE SAP-HAPPY CRIMINAL LIBERAL MIND WORKS Community organizer NObama represented the criminal ACORN group and sued lenders to force them to give out toxic loans to these losers.
And now---as President---Ohaha is suing lenders for complying, and actually lending the money. ......b/c the losers lied on their apps----and got saddled w/ huge mortgages they can't pay.
2012 candidate Obama talked a lot, but said only things that made him look good.
The whoppers keep on coming--- seeking reelection he said taxpayers got back every dime used for TARP to rescue the financial system, and that he also passed a historic law to end taxpayer-funded Wall Street bailouts for good.
The fool "forgot" to say US taxpayers are still owed big bucks for the billion dollar bailout of the financial industry. Fannie Mae and Freddie Mac together owe taxpayers over $140 billion.
Fannie/Freddie are centerpieces of the criminal enterprise called the Democrat Party-where Dem cronies and collaborators loot the organization, get cushy jobs, bonuses, and the like.
Fannie Maes political machine dispensed campaign contributions, gave jobs to friends and relatives of legislators, hired armies of lobbyists (even paying lobbyists not to lobby against it), paid academics who wrote papers validating the home ownership mania, and spread charitable contributions to housing advocates across the congressional map.
Fannie Mae serves as an industrial-sized patronage factory sharing profits with political allies, spreading taxpayer funds to voting blocslike ethnic groups-and doling out jobsto left-wing academics, Washington has-beens and back- scratching buddies.
Obama insider Fannie Mae exec Jim Johnson got sweetheart loans from shady subprime Countrywide. Pols raked in six- figure salaries as F/F engaged in Enron-style accounting, plunged into debt and helped usher in the subprime housing meltdown through cockamamie lending practices.
Bill Clinton appointed Franklin Raines, Daley and Rahm Emanuel just as the quasi-governmental F/M engaged in rampant book-cooking so that F/M insider could help themselves to massive bonuses.
The Chi/Tribune exposed how political whore Rahm Emanuels profitable stint was low-show w/ no work involved. Emanuel was not even assigned to committees, according to company proxy statements. Immediately upon joining the board, Emanuel and other insiders qualified for $380,000 in stock and options plus a $20,000 annual fee, public records indicate. W/ Wall Street Rahm Emanuel at F/M, accounting tricks were used to mislead shareholders about outsize profits F/M reaped from risky investments.
The goal was to cook the books to keep fraudulent earnings on the books, to make Freddie Mac look profitable on paper- AND to fraudulently obtain humongous annual bonuses for political insiders.
The Office of Federal Housing Enterprise Oversights report says that F/M CEO Franklin Raines---a Clinton appointee---and other Fannie Mae bigwigs, deliberately and intentionally manipulated financial reports to artificially hit earnings targets in order to trigger multi-million dollar bonuses for senior F/M executives.
Ex-Fannie CEO Franklin Raines should be behind bars for life. He is a crook of the first order. This thief Raines cooked the FM books precipitating losses of $9B (that we know of) for the single purpose of creating bonuses for himself and other F/M insiders. The SEC said Raines broke accounting rules by playing with risky derivatives.
RAINES COOKS THE F/M BOOKS---WALKS AWAY A MULTI-MILLIONAIRE After Raines was fired and exposed as a fraudster for cooking the govt books, Raines walked away w/ $90 million dollars, a $26 million parachute, PLUS..... Raines gets a MONTHLY pension of $116,300 for life. Raines had already collected $4.87 million in "special performance" shares. Raines owns options giving him $5.8 million in net profit after redemptions, plus another $8.7 million in deferred compensation for his six years at the F/M helm. There's more.
Raines keeps $5 million of paid-up life insurance. He and his spouse get free medical and dental benefits for life, worth over $1 million. NOTE: Raines earned $20 million in salary, bonuses and stock awards (that we know of) in one year.
To keep Raines happy within philanthropic circles, Fannie Mae will match Raines' charitable contributions by $10,000 a year.
After he was fired, Raines told the F/M board that he's entitled to get paychecks until June 22 giving him another $600,000, which triggers a $2,000 monthly rais
GENESIS OF THE F/M BILKING--- Clinton appointee. Fannie Mae CEO Franklin Raines' Letter to Shareholders--excerpted from 2003 Fannie Mae Annual Report
Excerpt ...Ten years ago the typical conforming mortgage required a down payment of 10- 20%, and low-down payment mortgages were considered too risky. But then we helped to standardize the 3-5% down payment loan, brought it to global capital markets, and made it available to lenders and communities nationwide. Now low-down payment loans are commonplace. And we just adopted a new variance in our underwriting standards that will make the $500 down payment loan widely available as well...
In 1994, we pledged to provide $1 trillion in capital to ten million underserved families by the end of 2000. Thanks to our housing and industry partners, we met that goal early.
Then in 2000, we launched our American Dream Commitment, a pledge to provide $2 trillion in capital to 18 million underserved families by the year 2010, including $400 billion targeted specifically for minority families (later raised to $700 billion in response to President Bushs Minority Homeownership Initiative). After four of the strongest years in housing and mortgage finance history, weve already surpassed the top-line goals of this commitment. But our work is far from complete.
So in January 2004, we announced our Expanded American Dream Commitment and pledged significant new resources to tackle Americas toughest housing challenges. Our new commitment has three main goals.
First, we will expand access to homeownership for six million first- time home buyers in the next ten years, including 1.8 million minority first-time home buyers.We also will help raise the national minority homeownership rate from 49 percent to 55 percent, with the ultimate goal of closing it entirely.
Second, we will help new and long-term homeowners stay in their homes through a series of initiatives, and commit $15 billion to preserve affordable rental housing and $1.5 billion to support the revitalization of public housing communities.
Third, we will increase the supply of affordable housing and support community development activities in at least 1,000 neighborhoods across the country through our American Communities Fund, and through targeted investments like Low-Income Housing Tax Credits that help finance affordable rental housing.
It is because of initiatives like our Trillion Dollar Commitment and our American Dream Commitment that we have exceeded our HUD affordable housing goals for ten consecutive years. (End Raines excerpt.)
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