FHFA Chairman Starts the Return to Irresponsible Lending & Helping Banks

Written by Posted On Friday, 16 May 2014 13:31

Demonstrating the epic stupidity that legends are made of, the esteemed new head of the FHFA Mel Watt made a few announcements on Tuesday. In short, they are designed to help the banks and expand credit access for “underserved borrowers.” Those folks in the middle…well you know the drill. These announcements reverse those in place under former head of the FHFA Edward J. DeMarco.

The FHFA’s new director, Mel Watt, made several announcements Tuesday that  aim to maintain Fannie Mae and Freddie Mac’s role in the housing Bowl-of-Stupidmarket as well as broaden home lending by the mortgage giants. Watt also announced that the FHFA would ease standards that it provides to banks on buying back faulty loans. For example, lenders will now allow two delinquent payments in the first 36 months after their acquisition of a loan. The change is intended to increase mortgage lending. Many banks tightened credit standards, partially because of a requirement that they take losses if a borrower defaults. “Our overriding objective is to ensure that there is broad liquidity in the housing finance market and to do so in a way that is safe and sound,” Watt said.

Seriously? This is must be because banks have suffered so during the crash and have been so cooperative with owners trying to do the right things. They care very deeply and want to help – just watch the TV commercials. Just don’t dare ask for help…or bring up a bailout or any of the taxpayer money they receive.

Watt also announced that Fannie Mae and Freddie Mac would keep current loan limits in place that the mortgage giants guarantee. The FHFA had planned to reduce the current limits on loans, which had set off an outcry in the housing industry that such a move could further hamper lending. Fannie Mae and Freddie Mac own or guarantee about 60 percent of mortgages in the United States. Last year, the FHFA had announced it was weighing a plan to gradually reduce the maximum loan amounts that Freddie Mac and Fannie Mae would be able to purchase for single-family mortgages. The FHFA wanted to reduce the current loan limits from $417,000 in most areas of the country and $625,500 in high-cost areas to $400,000 and $600,000, respectively, a reduction of 4.1 percent.

This really isn’t a bad move. The best move would be to underwrite a borrower depending on their entire financial picture – and not try to jam everyone into one box. How many well qualified and responsible buyers with steady well paying jobs and 750+ credit scores get roasted on a spit?

FHA also released its “Blueprint for Access” which outlines the additional steps the agency is taking to expand credit access for “underserved borrowers.” In the Blueprint for Access, the FHA announced that it is launching a pilot program called Homeowners Armed with Knowledge, or HAWK for short, that further incorporates housing counseling into the home-buying process for borrowers using FHA-insured financing. Under the HAWK program, homebuyers will qualify for savings on their FHA-insured loans by completing HUD-approved housing counseling provided by independent nonprofit organizations. The FHA said that the counseling is designed to help buyers understand the rights and responsibilities of homeownership and to improve buyers’ budgeting skills and housing decisions.

Can some define “underserved” borrowers? None of articles, including the FHA site, define this term. At least that flashy HAWK acronym provides a feeling of strength…no doubt this is a winning move for the economy. Once that counseling is completed, success is all but certain. Best of all, it allows the administration the opportunity to call the economy and the real estate market “improving and strong”.

What a clown show.

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Hank Miller, SRA

Hank Miller is an Associate Broker & Certified Appraiser in the north metro Atlanta area. Since 1989, real estate has been his full time profession. Hank´s clients benefit from his appraisal and sales experience; they act upon data, not baseless opinions. He is an outspoken critic of the lax standards in the agent community.

Hank remains an active certified appraiser and completes specialty work for FNMA, lenders and attorneys. He is a well-known blogger and continues to guest write for multiple industry publications as well as national outlets like the WSJ, NYT, RE Magazine, USA Today and others. He is a regular on public Q&A sites on Zillow, Trulia and many others.

Hank consistently ranks in the top 1% of all agents in the metro Atlanta area. He runs the Hank Miller Team and is known as much for his ability as he is for his opinions. He is especially outspoken about the lack of professional standards and expectations in the real estate industry.


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