excalibur
Diamond Member
- Mar 19, 2015
- 19,610
- 37,653
We've seen this play before.
Weakling Republicans refused to abolish FANNIE and FREDDIE, so here we go again. Because DumboCrats keep doing the same thing over and over again. Take their playthings away from them.
The Biden administration has pushed for easier home financing for higher-risk borrowers amid surging housing costs, increasing the risk of a wave of defaults, experts told the Daily Caller News Foundation.
The government-sponsored corporations Freddie Mac and Fannie Mae, regulated by the Federal Home Financing Administration (FHFA), have taken a number of steps to increase financing opportunities for higher-risk borrowers under the Biden administration, including subsidizing higher-risk borrowing by hiking rates on lower-risk borrowers. Many of these actions have led to Americans taking on an increasingly large amount of debt while lending facilitated by government entities has grown in size, creating a growing possibility that a wave of foreclosures and defaults could create a shock in the housing system, according to experts who spoke to the DCNF.
“The new Fannie and Freddie mortgage pricing directive raised rates on low-risk borrowers and reduced them on high-risk borrowers,” Jason Sorens, senior research fellow at the American Institute of Economic Research, told the DCNF. “This is not really a free market to begin with, but the risk here is creating something like the subprime crisis, where high-risk borrowers are encouraged to take on debt they can’t repay. Again, this has the potential to hit the bottom line for Fannie and Freddie.”
The guidance from the FHFA to Freddie Mac and Fannie Mae to essentially subsidize higher-risk borrowers took effect in May 2023, according to the Congressional Research Service. For example, under the new guidance, those with credit scores between 640 and 659 who put down a down payment between 15% and 20% would have a fee rate charged of 2.250% instead of 2.750%, while borrowers with a credit score between 760 and 779 with the same down payment would have their added rate hiked to 0.625% instead of 0.250%.
Rising housing costs have also led the entities to raise how much housing debt Americans can take on through the government entities, with the FHFA announcing near the end of 2023 that it was raising the mortgage limit for single-family homes to nearly $1.15 million in some areas, compared to the standard limit of $766,550, allowing Americans to take out even larger government-facilitated loans.
To fund its rising expenses and facilitate more loans to lower-income and higher-risk borrowers, the FHFA has proposed a new rule that would allow the government entities to purchase second mortgages.
“But the reality is that you have to look at Fannie, Freddie and FHA as one big entity, its government mortgage: it’s all run by the government, and as a single entity, it’s tilting towards higher-risk loans and higher debt ratios.” Edward Pinto, senior fellow and co-director of the American Enterprise Institute’s Housing Center, told the DCNF. “So you may be able to handle that debt ratio for a period of time. It’s when economic stress increases that you find out; as Warren Buffett said, ‘It’s only when the tide goes out that you learn who’s been swimming naked.’ It’s not until the economic stress increases that you find out who’s over their skis in debt.”
Total debt reached an all-time high for Americans in the first quarter of 2024, with consumers holding a collective $17.69 trillion. Around $190 billion of the increase in the first quarter was in mortgage debt.
Following the 2008 financial crisis, the Consumer Financial Protection Bureau set standards for private lending so that mortgages could not exceed 43% of a borrower’s income. The FHA, Freddie Mac and Fannie Mae often try to meet these standards but are not required to due to their relationship with the government, meaning the entities can give riskier loans.
The Biden administration also issued a rule in 2023 seeking to prevent “racial bias” in home valuations, arguing that societal prejudice was effectively leading minorities’ properties to be valued less than their white counterparts. As a result, the price of some homes owned by minorities might be being boosted, with the left-leaning Brookings Institute findingthat the vast majority of homes in majority-black neighborhoods are already appraised at or above their contract price.
...
thelibertydaily.com
Weakling Republicans refused to abolish FANNIE and FREDDIE, so here we go again. Because DumboCrats keep doing the same thing over and over again. Take their playthings away from them.
The Biden administration has pushed for easier home financing for higher-risk borrowers amid surging housing costs, increasing the risk of a wave of defaults, experts told the Daily Caller News Foundation.
The government-sponsored corporations Freddie Mac and Fannie Mae, regulated by the Federal Home Financing Administration (FHFA), have taken a number of steps to increase financing opportunities for higher-risk borrowers under the Biden administration, including subsidizing higher-risk borrowing by hiking rates on lower-risk borrowers. Many of these actions have led to Americans taking on an increasingly large amount of debt while lending facilitated by government entities has grown in size, creating a growing possibility that a wave of foreclosures and defaults could create a shock in the housing system, according to experts who spoke to the DCNF.
“The new Fannie and Freddie mortgage pricing directive raised rates on low-risk borrowers and reduced them on high-risk borrowers,” Jason Sorens, senior research fellow at the American Institute of Economic Research, told the DCNF. “This is not really a free market to begin with, but the risk here is creating something like the subprime crisis, where high-risk borrowers are encouraged to take on debt they can’t repay. Again, this has the potential to hit the bottom line for Fannie and Freddie.”
The guidance from the FHFA to Freddie Mac and Fannie Mae to essentially subsidize higher-risk borrowers took effect in May 2023, according to the Congressional Research Service. For example, under the new guidance, those with credit scores between 640 and 659 who put down a down payment between 15% and 20% would have a fee rate charged of 2.250% instead of 2.750%, while borrowers with a credit score between 760 and 779 with the same down payment would have their added rate hiked to 0.625% instead of 0.250%.
Rising housing costs have also led the entities to raise how much housing debt Americans can take on through the government entities, with the FHFA announcing near the end of 2023 that it was raising the mortgage limit for single-family homes to nearly $1.15 million in some areas, compared to the standard limit of $766,550, allowing Americans to take out even larger government-facilitated loans.
To fund its rising expenses and facilitate more loans to lower-income and higher-risk borrowers, the FHFA has proposed a new rule that would allow the government entities to purchase second mortgages.
“But the reality is that you have to look at Fannie, Freddie and FHA as one big entity, its government mortgage: it’s all run by the government, and as a single entity, it’s tilting towards higher-risk loans and higher debt ratios.” Edward Pinto, senior fellow and co-director of the American Enterprise Institute’s Housing Center, told the DCNF. “So you may be able to handle that debt ratio for a period of time. It’s when economic stress increases that you find out; as Warren Buffett said, ‘It’s only when the tide goes out that you learn who’s been swimming naked.’ It’s not until the economic stress increases that you find out who’s over their skis in debt.”
Total debt reached an all-time high for Americans in the first quarter of 2024, with consumers holding a collective $17.69 trillion. Around $190 billion of the increase in the first quarter was in mortgage debt.
Following the 2008 financial crisis, the Consumer Financial Protection Bureau set standards for private lending so that mortgages could not exceed 43% of a borrower’s income. The FHA, Freddie Mac and Fannie Mae often try to meet these standards but are not required to due to their relationship with the government, meaning the entities can give riskier loans.
The Biden administration also issued a rule in 2023 seeking to prevent “racial bias” in home valuations, arguing that societal prejudice was effectively leading minorities’ properties to be valued less than their white counterparts. As a result, the price of some homes owned by minorities might be being boosted, with the left-leaning Brookings Institute findingthat the vast majority of homes in majority-black neighborhoods are already appraised at or above their contract price.
...
Biden-Harris Regime Quietly Injecting Radical Policies Into Housing Market — And It Might Bring the Whole System Down - 🔔 The Liberty Daily
If you love the news, check out The Liberty Daily's homepage. (DCNF)—The Biden administration has pushed for easier home financing for higher-risk borrowers amid surging housing costs, increasing the risk of a wave of defaults, experts told the Daily Caller News Foundation. The...
thelibertydaily.com
