Wednesday, April 22, 2015

On That Road Again: Bad Loans Are Back At Fannie and Freddie

Subprime Redux: In separate new reports to Congress, Fannie Mae and Freddie Mac reveal Obama regulators are pressuring them to back high-risk home loans for "very low-income" borrowers. Here we go again.
Both mortgage giants report that to meet new "affordable housing" quotas set and enforced by the administration, they have had to "relax underwriting standards" — including permitting late payments, higher debt ratios and "unemployment benefits as source of income." They've also been forced to accept mortgages with as little as 3% down.
"These loans do not perform as well," Fannie warns in its 2014 Annual Housing Activities Report.
No kidding. But Fannie and Freddie are under the gun to ease underwriting standards if the standards "yield disparate results based on the race of the borrower."
Fannie even exceeded two of its five 2014 affordable housing benchmarks. The now-government-controlled company's purchase of mortgages made in low-income minority areas made up almost 16% of its portfolio, while its acquisition of low-income refinance loans accounted for almost 27%.
Meanwhile, Freddie surpassed three of its 2014 goals.
Fannie notes that to help meet the low-income home-refinancing purchase goal monitored by its new regulator, the Federal Housing Finance Agency, it "allowed lenders to use unemployment benefits as source of income." It also killed various restrictions on minimum down payments, household debt and delinquencies.
Read the rest of the story HERE.

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