Is the new affordable FHFA loan program predatory lending?

Let’s say you’re an American named Maria living in Southern California.  The year is 2006.  You make $45,000 and your husband David makes another $40,000.  You have two children aged six and four and your two-bedroom apartment is getting too small.  So you decide to consider buying a house.  Eventually, you and your husband find

Can I borrow the full amount and an extra 25% too?

Apparently the answer to this question is yes.  CNBC is reporting that home ‘owners’ who refinance their mortgages through loans backed by Fannie and Freddie will be able to borrow up to 125% of their homes’ value (hat tip Marshall Auerback).  That’s not a typo: we’re talking no-money down and 25% cash back.  Sign me

Bad behavior in financial services

In case you missed it, Freddie Mac and Fannie Mae have cost taxpayers tens of billions to date. The bill is still rising, however, as the two companies are looking for $50 billion more to avoid technical insolvency.

Then there is Citigroup who has had their hands out for $45 billion. They have also written down over $80 billion in bad assets. Yet, they are still splurging on corporate jets.

The video below reports on these events, on John Thain’s million-dollar office makeover and more. Needless to say, we have a clear case of banks behaving badly

A quick note on corporate bankruptcy and bailouts

Bankruptcy is a necessary part of a free market. I certainly believe this to be so. Rick Newman, who writes the blog “Flow Chart” over at U.S. News, is putting forward the provocative idea that failure is exactly what we needed more of in 2008 and what we should want in

Treasury Considers Plan to Halt Home Price Slide

Marshall here. Slowly but surely, the Treasury is beginning to move more aggressively on providing help to homeowners, as opposed to bankers. This makes sense: A financial meltdown and housing deflation cannot be cured simply by pumping money into the banking system. You also have to consider a program which provides mortgage relief to homeowners as well

Treasury to Consider Further Measures to Halt Housing Slide

The Treasury Department is considering a plan to halt the slide in home prices that would lower mortgage rates using Fannie Mae and Freddie Mac. The plan could reduce rates for newly issued loans to as low as 4.5%. Slowly, but surely, the government is moving in the right direction. It is beginning to dawn on Treasury (albeit, belatedly) that a prerequisite for economic recovery is not just the stabilisation of the banking system, but some sort of program which provides mortgage relief for home owners. This plan is a small start.

I have a problem with this though. It is “trickle down”

More on Fannie and Freddie – Signs of life in the Refi Market?

Below is a chart of variable rate loan applications as per cent of total. This can be looked at from a contrary opinion point of view, that is people are afraid of variable rate loans after they got burned on the upside in the last several years and thus they are moving to fix rate

Why not use Fannie and Freddie?

I don’t understand the lack of imagination in DC. All the politicians have to do is tell the banks to lower their variable rate mortgage loans on the books to 4% right now, today or else and it is like $600-$750 billion of stimulus. With short rates as zero it’s the least the banks can do.

That probably offends the free market sensibilities of many of our readers, so here’s an alternative approach: Why not Fannie and Freddie, which are now de facto arms of the US government

Gateway Bank sold, hurt by Frannie preferreds

When Fannie Mae and Freddie Mac went bust, a number of major players were stung as the value of Fannie and Freddie preferred shares plummeted. Principal amongst these players was Gateway Bank, which had a huge percentage of bank capital tied up in the preferreds. Now Gateway has arranged a takeover by a rival smaller

Brace yourself!

In case you missed it, the financial system in the U.S. is near collapse. This weekend was unbelievable. Lehman Brothers filed for bankruptcy. The world’s largest insurer AIG is looking for the Fed to help it avoid collapse and Merrill Lynch was forced to close a deal with Bank of America to save it’s own

The nationalization of America’s mortgage problem

This is a topic I first broached in May. The United States has a mortgage problem in that house prices have fallen so much and the financial sector is so leveraged that the U.S. faces systemic banking risk from a vicious circle in the mortgage sector. (I normally might have said ‘negative feedback loop,’ but

Fannie and Freddie: The politics of finance

The post-mortems on Fannie and Freddie are flying in. It seems like it is almost non-stop Fannie and Freddie. Let me add to those voices with a bit of a twist: the bailout of Fannie and Freddie was as much a political move as it was a move to save financial markets.While I see the