Tags: Mortgage | loan | Fannie | Freddie

IBD: Get Ready for Mortgage Crisis Part Deux

By    |   Thursday, 06 November 2014 02:24 PM

Unbelievably, just when America thought the housing market had healed at last, another mortgage crisis — Subprime Meltdown Part II — could be brewing.

This one is being wrought by the Obama administration, which has coordinated a bevy of regulatory agencies to once again loosen standards so the dream of home ownership can be realized by people unable to pay, according to an editorial in Investor's Business Daily.

But that dream could turn into a nightmare for the economy.

"Last month, while all eyes were on the election, Obama regulators quietly pulled off a hat trick on the easy-credit front," the newspaper reported.

"First, six regulatory agencies led by the powerful Consumer Financial Protection Bureau officially watered down standards for home loans packaged and sold to investors and Fannie Mae and Freddie Mac as securities. Mortgages with no down payment, weak credit and high debt-to-income ratios will face no legal liability."

As a result, mortgage-backed securities with subprime standards will no longer be called subprime. Instead, they will be designated as government-approved qualified residential mortgages.

Investor's Business Daily reported that SEC commissioners who objected to the relaxed lending rules got a lecture from President Obama at the White House. "Plus, radical community organizers bombarded the agencies with more than 10,000 form letters complaining that stricter mortgage requirements would deny low-income minorities access to credit."

At the same time, Federal Housing Finance Agency Director Mel Watt began finalizing a new regulation to place "affordable housing quotas" on Fannie Mae and Freddie Mac, according to the newspaper.

"According to the proposed rule, Watt will force Fannie and Freddie to devote more of their mortgage portfolios to 'very low-income' borrowers in high-minority census tracts," the editorial stated.

In addition, Watt noted that the agencies will resume their risky, precrisis practice of buying mortgages with as little as 3 percent down and "less-than-perfect credit."
"So, in the name of diversity, the administration is ordering Fannie and Freddie to accept higher shares of substandard mortgages from un-creditworthy applicants. So here we go again, mortgage crisis deja vu — financial reform be damned," concluded Investor's Business Daily.

The Wall Street Journal said loosened mortgage lending standards are the result of worries in Washington that the housing recovery could falter.

Big banks, which helped bring about the subprime crisis in the first place, are also pushing for lower credit standards because more mortgages likely means more profits for them.

JPMorgan Chase CEO Jamie Dimon asserted at a recent urban conference that "mortgage credit is too tight. They should have changed that a long time ago," The Journal reported.

"It's certainly possible that this is only the beginning of government pressure to make loans with lower lending standards," Alex Pollock of the American Enterprise Institute, which has long called for a reduced federal role in the housing system, told The Journal.

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Unbelievably, just when America thought the housing market had healed at last, another mortgage crisis — Subprime Meltdown Part II — could be brewing.
Mortgage, loan, Fannie, Freddie
Thursday, 06 November 2014 02:24 PM
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