Fannie, Freddie and the never-ending housing (homing?) crisis
A zombie alert. Bloomberg has the report:
Chris Whalen is famous lately for predicting a return of the subprime crisis in 2011. His thoughts on the greater mortgage system are also interesting, as discussed in an interview with King World News.
Whalen says GSEs [Fannie Mae and Freddie Mac] don鈥檛 help homeowners. Rather they promote a system that locks marginal borrowers into costly interest payments, helping their own bottom line.
The zombies at Fannie and Freddie prey on house buyers.
We interrupt the normally crisp flow of ideas in these daily reckonings with a parenthetical remark. Looking through the newspapers and magazines this weekend we were offered thousands of 鈥渉omes鈥� for sale. We thought a home was something you lived in. But the ads offer 鈥渘ew homes鈥� 鈥� empty houses that no one has ever lived in. It doesn鈥檛 make any sense to us. But we conclude that the word 鈥渉ouse鈥� has been withdrawn from the dictionary.
Yes, dear reader, the homing crisis in America only seems to get worse and worse. We remind readers too that this was a crisis created largely by the government 鈥� which subsidized mortgage rates (sponsoring Fannie and Freddie), provided a tax break for mortgage interest, and told banks that they had to lend to poor credit risks in bad neighborhoods.
And now, true to form鈥he government is making it worse. How? By bailing out failed lenders 鈥� Fannie and Freddie. The last estimate we saw put the cost of keeping these incompetents alive at more than a quarter of a trillion dollars. That is bad money after bad money, in our opinion. The Feds are also threatening to slow down the foreclosure process鈥hich would further delay the correction in the homing market.
Now鈥hris Whalen continues:
鈥淚f you鈥檙e a wealthy American you can [refinance], but if you鈥檝e got a seven-something FICO score and you鈥檙e in a so-so neighborhood so the collateral doesn鈥檛 have a big score in the equation, you鈥檙e screwed,鈥� Whalen says. 鈥淭hese are the people Fannie and Freddie doesn鈥檛 want to see prepay, so they can keep the income on their portfolio. It鈥檚 horrible! People don鈥檛 realize how predatory these government agencies are.
鈥淓verything Orwell ever wrote was true and it鈥檚 proven by the way people like Barney Frank and Chris Dodd have personally benefited from this housing mess, while they鈥檙e actually hurting the poor people most.鈥�
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