Aunt Fannie and Uncle Freddie are coming to the Rescue ..... Yee Haa !

By
Real Estate Agent with RE/MAX Associates CA BRE# 01048160

 Aunt Fannie  Mae and Uncle Freddie  Mac are coming to the rescue of the sub-prime lending fiasco. The sub-prime lending market saw a huge escalation in its business and market share  that coincided with the housing boom of the last 5 or 6 years.

With So many Adjustable Rate loans generated, the proverbial "stuff" hit the fan" when borrowers were faced with adjustments in their adjustable interest rate loans.

With a slowing Buyer's market and many of the housing markets facing at least some decrease in home values, it left little or no room for converting many of these adjustable rate loan to fixed rates.

When the loans were originally taken out, there was evidence that the accelerating increase in home values would insure  the ability to convert these loans to fixed rates.

Now, with Fannie Mae and Freddie Mac's increased involvement, there are some alternatives for borrowers to refinance out of these problematic loans.

Wall Street helped create the troublesome sub prime market by packaging up the sub-prime loans into tradeable securities. With the advent of so many rising delinquencies and foreclosures, Fannie Mae is heeding the pressure brought on Consumer Advocacy Groups and politicians urging more involvement to help slow down the financial conundrum.

Many of the sub-prime lenders have closed already their doors and others have tightened down their hatches with their new tougher standards but the horse ,as they say, has already left the barn and someone needs to coral him back.

Fannie Mae has brought forth it's limited program called "Expanded Approval" developed in 2001 aimed at borrowers with less than, shall we say "stellar" credit, to all of its 2000 lenders nationwide increasing the number of lenders with access from 500 to all 2000.

Fannie Mae also is including in it's program new 40 year loans as an option in its sub-prime program in hopes of improving the affordability of its borrowers.

Aunt Fannie is however steadfast in maintaining the previous rules of NO Stated Income or Stated Asset loans and are is still offering the the hybrid adjustable loans with fixed rates for the first 5,7,or 10 years to help buyers qualify with slightly lower rates than the 30 or 40 year fixed.

Fannie and Freddie are getting totally immersed in coming to the rescue of so many borrowers that they hope to help out before they default and and become a statistic to the increased number of foreclosures.

 

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William Johnson
RE/MAX Associates - La Jolla, CA
San Diego Real Estate Voice, GRI CRS e-Pro CDPE

Hi Lenn, You are so right. Along with all the abuse, there were some innocents through in to the mix. Sharon suggested maybe fixing the rate to the current level. I proposed, fixing the current rate on these adjusting loans for 3 additional years to get many of them trough this time and allow for some alternative adjusting down the road. Not to defer indefinitely but it might help. The hose is already out the barn. Building a stronger door will only help if we can catch the horse and put him back in there, lol.

So many do both things. Have the investors that made the gain, suffer most of the loss and then help the victims of the group. The guilty of the group should just forfeit. Hopefully then we woun't have another mess down the road.

I am also in favor of Congress setting the cost of mortgage purchase money to a fixed rate of 6.% for a 5 year period. That could be a Government sponsored buy down of the rates. Once we get all the mess contained , then we could go back to a free market. The reason for such drastic action would be to prevent the global economy from reeling from this mess while it is being fixed. 5 years seems like a long time but it will take every bit of that to fix this mess.

Jul 29, 2007 07:50 AM #57
Rainmaker
1,073,709
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Some of these programs can definitely help low credit score buyers and buyers who need alternative financing methods.  Nice psot
Jul 29, 2007 07:50 AM #58
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William Johnson
RE/MAX Associates - La Jolla, CA
San Diego Real Estate Voice, GRI CRS e-Pro CDPE
Hi Julie, Thanks for weighing in and you are so right. Many have a lot of really good ideas. I am enjoying being out of my comfort zone and stretching on this issue.
Jul 29, 2007 07:52 AM #59
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William Johnson
RE/MAX Associates - La Jolla, CA
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Hi Teri,I am so glad you found this post. This one and other seemed to have disappeared. I found them but they were way far back. I am sure it is only my imagination with so many writers on AR. There is a great discussion being pursued  here and lots of great information is coming forth. I feel privileged to have started the thread. Thanks in part  to janeAnne who suggested to AR that they feature this. I feel honored. That's for always being here for me Teri
Jul 29, 2007 07:56 AM #60
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William Johnson
RE/MAX Associates - La Jolla, CA
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Thanks Gary for weighing in. Hopefully these programs and FHA revised guidelines all help. But more needs to be done to get more relief and stop the bleeding from the increased number of NOD's. Hopefully more will be done some. The longer term viability of the the whole market depends on it.
Jul 29, 2007 07:58 AM #61
Rainer
9,464
Adrian Alvarado
MGR Real Estate Inc. - Ontario, CA
Inland Empire Real Estate

We are going back to old times I think people sometimes forget that before the boom there was no such thing as 100% or stated loans. At this time we are now being reminded why these loans are not always available. They eventually come back to bite the lenders in the rear. Hopefully the Fannie mae and Freddie Mac help will stabalize the market a little. FHA is back and Full Doc is gonna be required on all transactions as stated programs are falling by the day. Nice post and learn those programs they are definetly gonna help out a lot.

Jul 29, 2007 08:00 AM #62
Rainmaker
197,401
Roberta Murphy
San Diego Previews Real Estate - Carlsbad, CA
Carlsbad Real Estate and Homes

William: A good and thought-provoking post! 

The Chinese, who bought so many of the failing mortgage backed securities, are fuming--and turning cautious.  Our credit markets have depended on their infu$ion.

Tighter fists in China will likely influence recovery time. 

Just my opinion... 

Jul 29, 2007 08:21 AM #63
Rainmaker
236,719
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
William - This is good news.  But, I have a question.  I recall this post coming out on 7/26 and commenting on it then.  Why is it showing up as a new post on the dashboard for 7/29?
Jul 29, 2007 08:24 AM #64
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William Johnson
RE/MAX Associates - La Jolla, CA
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I think it was Friday the 27th? I have no idea how all this works. But i will say I was all but convinced I would never have a featured post again. Maybe some one is taking pity on me? It feels like II have to work twice as hard to keep up with the others. I sure am grateful though. I woke up this morning to the surprise of all these e-mails and it was like magic had happened in the night. No way to explain, I have no idea.

How are you? Are you going to San Francisco? Sure wish I was going. With any luck, I can go next year. By then maybe a new face will be welcome? LOL

Jul 29, 2007 08:43 AM #65
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William Johnson
RE/MAX Associates - La Jolla, CA
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Hi Roberta, I fear you are so right. We all seem to just watch in wonderment as the Chinese ( who once proclaimed they would bury us all) maneuver to give us so much of what we want  that we choke on it. An interesting way  to teach. I remember hearing a story about someone with  a dog that just loved ice cream. He just wouldn't stop with wanting it all the time. They said they gave him a whole quart of it at one time , and he ate till he was so sick.He reportedly never ate ice cream again. Maybe that is what the Chinese are conditioning us for. Give it till they choke themselves. Scary thought.
Jul 29, 2007 08:49 AM #66
Rainer
15,237
Suburban Chicago Illinois Real Estate
Suburban Village Realty - Barrington, IL
It's going to be a little more complicated then just changing a few things around.
Jul 29, 2007 10:25 AM #67
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William Johnson
RE/MAX Associates - La Jolla, CA
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I am quite sure you are correct, Paul and Michelle. I wish what I was saying here really would fix it, but it won't. It was at least a bit of good information in the right direction, but many more miles need to be traveled to fix this.
Jul 29, 2007 10:57 AM #68
Anonymous
William Johnson GRI CRS e-PRO

Hi Adrian,

Thanks for your thoughts on this and you are so right about these stated loans not being available. They do a serve a valuable purpose for some people that are not abusing the system . What we need is everyone to come together on this issue and create the loan products that will continue to serve the respective communities and consumers.

it is no easy take but t has to be done. To easy  money invites problems, to difficult money creates even more problems. There is not now any one size fits all product but I am hopeful that soon, the powers that be in the money investment game will loosen up the strings and get products that actually don't inspire abuse but do inspire that the loan is doable. Thanks for adding in and you comments are so valuable to the purpose of this post.

Jul 29, 2007 12:45 PM #69
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William Johnson
RE/MAX Associates - La Jolla, CA
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Hello Ray, Thank you for weighing on this conversation. As I mentioned in this post and the later one, i have a tendency to see things in the light of day and not under cloudy skies. The ingenuity and genius in our country is limitless and I feel we need to see at least the efforts made in that light. I am accused of seeing the world through rose colored glasses sometimes but they sure do make one feel better about the morass that is going on around the world. Yep, we are greedy and arrogant at  times. But we are alos loving and forgiving at other times. We are genius at times and dumb as a rock at other times. We can either focus on the fallings  ore we can focus on the positive energy and efforts that people try to and amend the problems. We will alway have those, btw, because we are ever moving and changing focus to create new demand. It is called growth and it has its failings just like anything else. But it also has its successes and we should not ignore  the good just to be critical of the bad. Thanks for the positive light  that lights the way and not the darkened streets that makes one fee afraid and alone.
Jul 29, 2007 12:55 PM #70
Rainer
225,598
Diane Bell, Hilton Head Real Estate, Bluffton
Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC
News to me---very interesting!
Jul 29, 2007 01:01 PM #71
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William Johnson
RE/MAX Associates - La Jolla, CA
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Hi Diana, Stayed tuned there will be more following this report. Thanks for commenting
Jul 29, 2007 05:14 PM #72
Rainmaker
310,458
John Occhi
Mason Real Estate - Temecula, CA
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate

William, I am looking forward to what else you have to report on the topic.  I have been trying to keep up and have blogged on the problem - it's nice to see a solution.  I just don't want to see the solution bail out the lenders who created this situation in the first place - help for the homeowners is fine - but not the lenders.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

Jul 29, 2007 06:39 PM #73
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William Johnson
RE/MAX Associates - La Jolla, CA
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I am looking all over for things and I found something else. Hopefully posting it today. Need to check out a few documents first but it should be interesting-financing alternatives? No, not stealing the house,lol Thanks so much for commenting and adding in to the interest of the post.
Jul 30, 2007 03:02 AM #74
Rainer
3,805
kathryn bovard
Prudential Americana Group - Las Vegas, NV

 

   This is really a wonderful tool and will be the topic of my next sales meeting--thanks!!  

 

Jul 30, 2007 05:37 AM #75
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William Johnson
RE/MAX Associates - La Jolla, CA
San Diego Real Estate Voice, GRI CRS e-Pro CDPE
Hi Kathryn, Thanks for your comments and hope this will be useful. While you are on the topic, you might check out HR Bill 1852. It is the bill that contains the revised points for overhauling the FHA loan guidelines. It is also positive. Might help to kick--start the lower ends of the market and there is also some speculation that the Federal Reserve will lower the overnight rates this fall which might have a positive effect on the longer rate terms. The writing is on the wall that we must all make a very proactive response and do what we can as professionals to help those that are defaulting by finding alternative methods of retaining their homes and encouraging new Buyers to utilize the available tools to get this market going. Every little bit of good news will help curtail  the focus on so much negative news. 
Jul 30, 2007 06:20 AM #76
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