In another move displaying the utter idiocy of the federal government, Fannie Mae and Freddie Mac are now again authorized to offer 125% LTV refi loans.
Can somebody out there tell me why this makes sense? Short answer: It doesn’t make sense, and this is short-sightedness nearly at it’s finest. (The high-water mark for short-sightedness goes to the Obama stimulus program, which is clearly not working at all.)
It seems it should be obvious that lending significantly more than a property is worth would be a bad idea, particularly since our current financial crisis is due in large part to the overheating of the real estate market due to unwise lending guidelines, but apparently common sense isn’t so common after all.
So now we have 125% LTV refi loans from Fannie and Freddie – both of whom were bailed out to the tune of billions of dollars. Does anybody else get this? Apparently not. I saw this comment about this new policy that was made by a real estate agent: “why does there have to be a limit at all. Are folks who are upside down more than 25%, which is millions, somehow less in need or deserving of help????”
This statement was clearly made by someone who is unwise financially. Financial “need” has nothing to do with good lending guidelines. Those who most desperately feel they “need” to borrow money are frequently the ones least qualified to do so. And the notion that anyone “deserves help” from the federal government – which is funded by you and me – is not based in law. The only way one can “deserve” a loan is to both want it and to be qualified to receive it…not to mention finding a lender willing to grant the loan. “Need” isn’t (or shouldn’t) be a factor in underwriting, and real estate loans are not entitlements.
(But Barrack Obama’s administration disagrees with this. It’s clear that the guy has never been involved in business or private industry of any type.)
Lest you think I’m being cold and heartless, remember this: Our current financial crisis is rooted in poor lending guidelines made by lenders of all types as dictated by the federal government. Without those errors in judgment, we likely wouldn’t be facing our current economic crisis. Preventing more of those types of errors in judgments must be the foundation of ending the current economic stress our country faces.
So here we are again, wishing a faux congratulations to Treasury Secretary Timothy Geithner, President Barrack Obama’s hand-picked custodian of the economy. Or, as Ronald Reagan once said… “There you go again”…
Your thoughts are welcomed, whether in agreement or opposition. Please use our comments area below. Thank you for reading RealEstate.BryanEllis.com – the Alternative Media for Serious Real Estate Investors.