Bloggers digest Fannie-Freddie takeover

Submitted by Michael LittleBig on September 11, 2008 - 7:59am.

The Nationalization of Freddie and Fannie was a gift to the wealthy and the powerful,especially to China and Japan who I understand hold most of that stock.
It does little if anything except to increase the national debt and insure a bleak future for all Americans who will have to pay these trillions of dollars which represents unbridled spending by those who hold the nations purse-The Congress.
My response to the government as is follows:

For the Congress, who represent that part of government that lives better than its people.

Like a foghorn in the night sounding its warning, those who ignored the warning also deny that that they are accountable for the sinking of the ship, the USS Economy.

The foghorn was the housing meltdown that started with a borrower and a lender. The lender did not follow the rules and the borrower had no rights which ensured his foreclosure. This transaction was like a spark on dry prairie grass on a windy day. The fire is now out of control and the devastation unfortunately will go on until Congress changes the system of regulation and accountability. The rules of engagement if you will.

The old rules that we have won’t give us the foundation to cure or help us to rebuild our economy. The other side of the problem is that there is no leadership or bold innovation
to formulate the new rules that will produce effective solutions.

Congress appears to be confused as to what should be done. By year end 2009 there are a projected 6 million foreclosures. The financial regulatory system did not fail: the financial regulatory system was never meant by design to regulate, but rather to protect the wealthy and powerful banking interests. The lack of legislation along with the type of legislation that has been passed proves what I say.

The old saying “that a chain is only as strong as its weakest length” applies to the mortgage finance system where the borrower (weakest link) has no voice under the federal regulatory financial system.

Accordingly, what is the core problem of this mortgage meltdown crisis? The central issue is the Congress of the United States. Is the Congress able to regulate and pass meaningful regulations to control the aberrant behavior of those wealthy and powerful financial institutions – who, with their reckless disregard for safe and sound banking practices, have brought the American economy to its knees? It is ludicrous to hear public officials blame the home mortgage borrower for this foreclosure crisis. The American government watched this horrific event unfold piece by piece and did N-o-t-h-i-n-g. It is ironic that John McCain is running for president when in the last saving and loan crisis in the 1990s he was part of the Keating 5. Conversely Senator McCain and the majority of Congress have not served the American public when it comes to safeguarding the economy. John McCain again in2008 has done N-o-t-h-i-n-g.

Just what does Congress mean when it talks about the regulators? For example, The Office of Thrift Supervision, a federal regulator of federally chartered savings banks, has been remiss in their responsibilities in supervising, regulating and enforcement. The OTS stated in December 2006 stated that there were no Federal Consumer Banking Regulations. That means that the mortgage borrower has no right or redress to contest, object or question any unethical conduct by their federal mortgage lender under the same regulatory system in which the bank lends its mortgage money. In short, the borrower has no voice, no redress and no protection from the bank that makes all the rules; from the bank that creates and supplies all the legal mortgage documents and enforces their mortgage covenants as they see fit. Banks therefore operate with absolute impunity. The Banks answer to no one. The banks operate on the “Lynch Mob Theory”. They foreclose the mortgage and hang the borrower. This in itself is tantamount to discrimination since the borrower has no forum from which he can legally speak and defend himself.

This lack of regulation and oversight by the Congress also pertains to the Appraisal Sub Committee which is, by Congressional mandate, to protect the consumer to ensure the quality and integrity of property appraisals performed in this country. Recently, after a six month investigation the Associated Press determined that this system is broken. Marc Weinberg, the former director of that agency, was quoted as saying that he agreed. I read this date that 10 million homeowners are underwater, in other wards they owe on their property than it is worth.
That begs the question of how reliable is the property appraisal market value now being performed in today’s real estate turmoil?

The 700 page housing bill recently passed by Congress protected every one but the homeowner and never mentioned new regulations to protect those among us who have the least to gain but the most to lose. Congress wanted to pass something. The reality is they passed nothing. This bill included protection for Freddie and Fannie who directors took millions of dollars at the expense of American homeowners who face the threats of foreclosure.This bill was not meant to protect the American public. This bill was an indecent sham created by the Congress of the United States.

A borrower who files bankruptcy to protect himself from a flawed or defective appraisal ( for example) that the bank used for their lending decision carries that negative stigmatism on his credit report for 8 years. But if the bank’s conduct is unethical, the bank’s reputation is unaffected. This is again another example whereby Congress by design protects the financial institutions at the expense of the borrowers. Bankruptcy ( until 2005)was the only Congressional protection legislation passed that gave the borrower legal leverage to answer unethical conduct by bank in its lending activities.

Congress has yet to acknowledge the fact that there are a percentage of federal lenders whose
mortgage lending practices have devastated millions of borrowers and have created a credit caste system for these borrowers, which in turn have made them credit “untouchables.”
Nothing the Congress does - no innovative program, no solid solution - can be successful until those needed regulations are passed and become the responsibility of effective transparent federal regulators.

The mortgage borrower given redress under the same federal regulatory system (under which the federal bank lends their mortgage money) can actually act as an early warning system. The analogy is like the smoke detector in a house that goes off when it senses smoke and protects those occupants. This is exactly what can happen when a borrower can effectively file a complaint with teeth against his lender for wrong doing. A watchful and determined regulator can then pinpoint a negative pattern before it becomes a crisis.

The Treasury Department,FDIC, FED and the Federal Regulators as they operate today have exacerbated the housing meltdown much like the uncontained wildfires that spread out of control in California.

Only Congress can level the playing field giving the consumers the same weight from which the financial institutions have always benefited. The consumer is just now beginning to understand
that these wealthy and powerful financial institutions let their greed get out of control. The consumer no longer trusts the real estate system of buying, selling and financing. The price for many of them has been horrific.

There are millions of homeowners who are in foreclosure or have completed foreclosure.
They have no voice. Their silence is deafening. I know I cannot speak for all of them.
I am one of them.

Michael LittleBig
PO Box 16588
Rocky River OH 44116

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Submitted by William Metzker on September 11, 2008 - 12:29pm.

What stuns me the most is the lack of discussion about the takeover. My office has about 70 agents and I heard no one bring it up nor wish to discuss it beyond a "Oh, yeah, that."

To put it in perspective, the total U.S. debt is just over $9.6 trillion. The combined Fannie/Freddie debt is about $5 trillion. The U.S guaranteeing it is like your family, with a $500,000 mortgage, guaranteeing your neighbor family's mortgage for $250,000 to keep the neighborhood cool--in effect, increasing your family's liability and getting nothing tangible in return but a possibly promising future.

The total debt of Great Britain is about $2.3 trillion, or less than half of F/F's. If the U.S. had not guaranteed the F/F debt, held world wide, and F/F had failed, it would have had twice the effect on the world economy as Great Britain slipping under the Atlantic and disappearing. The failure of F/F would have led to a world-wide recession making the Great Depression of the 1930's look like a croquet game.

F/F shareholders, by the way, are pension funds, mutual funds, etc., not foreigners. Oregon's PERS lost $50 million with the devaluation of F/F shares (although it gained $34 million in bonds).

Sadly, neither the Obama nor McCain camps have weighed in, other than in abstract ways.
And that's the most disturbing thing of all.

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Submitted by Jay Thompson on September 11, 2008 - 12:55pm.

But William, it *is* being discussed -- in the "blogiverse". Those links I compiled in my post are only a fraction of the ones out there.

Granted, the bloggers make up a small portion of the overall real estate professional population. But they are a vocal and opinionated group. Pretty darn smart too, generally speaking.

Jay Thompson
Broker / Owner
Thompson's Realty

Blog: www.PhoenixRealEstateGuy.com

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Submitted by Eric Reque on September 11, 2008 - 2:26pm.

www.MyHouseIsUnderwater.com

Loan modification are the only way out of this mess. They need to do them and do them now.
Short Sales and REO deals are killing the valuations. We need to stop the bleeding and keep people in their homes

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Submitted by Linda Hutchinson on September 11, 2008 - 6:10pm.

I commented on my blog at www.OrlandoNest.com. I think this bailout is essential to reversing the current housing crisis.

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Submitted by Dennis Pease on September 11, 2008 - 9:37pm.

A couple things we know is that the tax payer will foot the bill and that mortgage rates have fallen this week.

So since you are going to pay for the bailout you might as well take advantage of the great mortgage rates and some of the great deals available now.

Dennis Pease
Remax Integrity
Eugene Oregon Real Estate

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