Archive for the 'Home Foreclosures' Category

Fannie and Barney-The Great Cover Up

Fannie and Barney –The Great Cover Up

In 2002 John Snow, then Secretary of Treasury, appeared before Barney and his band of clowns and tried to get the committee to adopt major changes to the functioning of Fannie. Barney blew him off in a successful effort to cover up for the accounting fraud perpetrated by Franklin Raines and his cohorts.  Raines got a bonus and we got a financial crisis. Barney would not allow Fannie to be touched and insisted that we needed more home ownership, especially by people who could not afford to be owners. So began the subprime disaster.

Today there is no effort to change things at Fannie. There is a major effort to change banking and Wall St, which is needed, but Fannie goes on losing $20 billion of taxpayer hard earned money every month. 46% of all loan modifications by Fannie are going into default again. The cost when all done will be close to $400 billion of taxpayer money vs TARP which all of the large banks repaid with an 8% profit to the taxpayers. Yet who gets called names. Who gets hauled before TV cameras and accused of misdeeds. Who does the media make to look like criminals. Not Franklin Raines or Fannie executives of the past.

Fannie and Freddie and FHA are perpetuating the problems in the housing market, all in the name of the Obama administration wanting to make people believe they are solving the foreclosure problem.  While the Fannie Freddie entities do currently provide all the mortgage funds, that is not how it should be. This is simply more government control of a vital part of the economy. It is subject to the political whims of Congress and the administration, and not the market place. There is no on book budget item for Fannie losses. They just get swept away under the rug and no hearings ever occur to ask where all the money has gone.  

We are building up a huge unrecoupable debt that Treasury will have to continue to fund with your tax dollars. The HAMP program was made to sound good but it was a bad idea that never took reality into account. As one who had attempted to buy defaulted mortgages and rehabilitate them, I have a first hand understanding of the problem. Most homeowners in trouble have no possible way out other than to sell or send jingle mail. They are way in over their heads and no modification is going to ever work. There is a 355 portion of the population that cannot, should not own a home. Many defaulters know they can just stop paying while HAMP games delay the inevitable. Meantime they live rent free in the house. They do not provide income data because they know they fail any test of ownership because they never had the income. The game is delay, delay and obfuscate until finally there is no choice but to foreclose or short sale. As of today only 17% of HAMP modification efforts result in actual mods, and these likely could have been done without all the money spent making believe there is a program. The only way the housing problem is going to get solved is mass foreclosures and quick short sales to clear the market. All the government is doing is to force the banks to drag out the problem for years and not solve it.