Note: A special free training event is being held to reveal a LOOPHOLE in the recent Freddie Mac publication that effectively eliminates the A-B-C short sale flip. Your invitation to this training is at the end of this article.
In a vote split 56 to 43, senators decided to keep Fannie Mae and Freddie Mac in their current forms on Tuesday by defeating an amendment to the financial regulatory reform package that would have established an end date for taxpayer support for the mortgage giants and delineated a 15-year plan to dissolve the entities.
Senators McCain (R-AZ), Gregg (R-NH) and Shelby (R-AL) sponsored the amendment, and DSNews.com reported that Shelby stated on the Senate floor that “Freddie Mac and Fannie Mae were at the heart of the financial crisis” in his explanation and support for the amendment. However, enough senators believed that the mortgage giants are the only thing keeping the “battered housing market” going that they defeated the bill, with Senator Chris Dodd (D-CT) calling it “reckless” and “hardly reform.”
Whether Fannie and Freddie are prolonging the problem or are crucial and necessary, if something is not done to reform their practices they will continue to be a drain on the taxpayers and create a cycle of housing disasters far into the future. If the two are not dissolved, then they certainly need to be revamped in order to prevent the problems of the past few years from simply re-developing around the time that the market gets back on track.
Thank you for reading the Bryan Ellis Real Estate Letter – your comments and questions are welcomed and encouraged!
Note – a few weeks ago, a devastating analysis was published on Freddie Mac’s website that spells the end of the A-B-C short sale flipping strategy for real estate investors. However, a colleague of mine has discovered a loophole which can be reliably used by real estate investors to continue use of that strategy. For more information, go here.
The problems with Fannie and Freddie were primarily due to a lack of oversight and reckless abandonment of common sense underwriting guidelines. I remember when Fannie began allowing no income check loans. They required 25% down, good credit scores and verifiable assets. That type of lending will never cause a housing bubble. Rising home values fed the fire giving institutions uncharacteristic optimism.
Lenders in this country are like bad investors that buy high and sell low…. instead of reigning in underwriting standards as values rise, they only loosen them. Until a crash. Then they decide to tighten things up which only extends the bad times. If they were to bring guidelines back to true common sense lending things we would recover fairly quickly. Of course, finding actual investors to buy their paper is another matter.
The reform will be tospend more money the same way we did in the past. If a “progressive” program doesn’t work and blows up the problem is never with the program but with the fact we didn’t spend enough. The buzz on why the stimulus package didn’t do what it was designed for was we only spend 3/4 of a trillion dolars. definately not enough. huh?
I can not believe that our paid politicians would continue this reckless thinking playing on the consumers economical intelligence this disposition would only put our tax payers with more debt this is a buyers market not sellers it they continue there will be less loans more banks folding looking again for the tax payers to make even more BAILOUTS NONSENSE
When you don’t let bad systems fail, you just create monsters that you then must feed and feed. And I think it needs to be reiterated that the government has no money to do these things. The government gets all its money from us–directly through our own taxes and indirectly through taxes on businesses, every penny of which we individual citizens ultimately pay.
But they’re “too big to fail!”