The New Year kicked off with some pretty exciting news in the real estate and investing sectors. Here’s what you had to say about some of our most-talked-about news coverage:
RE: “Federal Reserve Recommends Expanding GSEs to Turn Housing Market Around”
Summary: In a 26-page white paper submitted to legislators this week, the Federal Reserve recommended expanding Fannie Mae and Freddie Mac, renting out GSE foreclosures (possibly to the delinquent homeowners already in them), and loosening up lending and refinancing requirements to allow an additional 2.5 million homeowners to refinance through the Home Affordable Refinance Program (HARP).
Here’s what you said:
“Gerald” kicked things off by accusing BEREL reporters of wanting to “bite off the hand that could possibly be feeding the real estate market more” and expressed confusion about our motivation for reporting on this topic. He concluded that the Fed may not be completely necessary, but that the article should “be criticizing Obama and Congress – not the Fed.”
Others like “Rosalyn” disagreed, saying that the move would “encourage more government involvement in private finances” and expressing the hope that private investors would be allowed to buy up GSE properties in foreclosure instead.
Readers’ main concern seemed to be that the GSEs would not be wound down if the Fed’s recommendations are enacted, with “KCMike” describing the FHA as a “tool to create U.S. disasters.” In the end, “Stanley” probably summed up prevailing sentiments most succinctly when he said simply that “this would cause more damage” while “Ernie” wrapped things up with a middle-of-the-road proposal that “Fred and Fan…go on a diet…join forces and be streamlined.”
Missed this article? Click here to read all coverage and comments.
RE: “Top Former FDIC, Wells Fargo Execs Say Fannie and Freddie Must Go”
Summary: Richard M. Kovacevich, former CEO of Wells Fargo, and William M. Isaac, former FDIC chairman, published a plan for the unwinding of Fannie Mae and Freddie Mac. They blame government guarantees for the subprime bubble and resulting financial crisis, and propose that the GSEs’ existing portfolios be sold off, that new GSE-guaranteed mortgages be limited out of existence, and that the FHA be used in a “transparent manner” to handle low-income and minority housing aid.
Here’s what you said:
“Linda” went on the offense right away, calling Kovacevich and Isaac the proverbial “fox[es] in the hen house” and warning readers that their solution does not “have the public interest in mind.”
However, many of you disagreed, including “Theresa,” “Jerri,” and “Neil.” Most readers did express concern about the viability of any type of true transparency in government, with comments like “Big Dave’s” skeptical “OK, they came up with a solution, but using the word transparent? With the government?” showing how disillusioned many of our readers are with our entire political and fiscal system.
“Jim” wound things up, saying that there were many factors involved in the “firestorm” and that it was time for “those who reaped the multi-million dollar bonuses [to]…admit the responsibility for what you have done [and not] pass the buck to whoever you can place in the crosshairs.”
Clearly this topic is sensitive and controversial. Missed the coverage? Click here for the article and all commentary.
RE: “Market News: Chinese Moves in Gold Sector Could Turn Markets, Economies Upside Down”
Summary: “Insider sources” report that the Chinese government is attempting to negotiate contracts with gold mining companies to buy all of their gold output long-term. Should this be true and the Chinese government be successful, it could turn world markets upside down and even result in “outright debt default of one or more…national governments.”
Here’s what you said:
“David” warned that “there is a lot more gold and silver on paper than actually exists.” He called the entire situation “musical chairs with metals” and recommended buying “only…the stuff you can take home.”
Although other readers expressed concern about the situation, most, like “Perrywinkle,” seemed to feel that if you “get your physical gold now…you’ll be just fine 3 years from now.”
Of course, we’d also like to let “Jack” know we appreciate the shout-out and we’re glad that “of all the real estate/investing letters I receive, I enjoy Bryan Ellis the most.”
Missed the reporting on this frightening global scenario? Click here to read all news coverage and related reader commentary.
RE: “President Bypasses Congress, Appoints Director of the Consumer Protection Bureau”
Summary: Earlier this week President Obama appointed Richard Cordray, former attorney general of Ohio, to the position of director of the Consumer Financial Protection Bureau (CFPB) via recess appointment. The only problem? The senate, which had blocked the appointment of Cordray last summer, was not in a recess, but actually in a pro forma session. Critics of the move argue that the appointment is unconstitutional and a power grab on the part of the president, while his supporters say that the Senate forced the president’s hand by refusing to endorse the appointment in the first place. Some analysts fear that similar action could be taken when appointing a new director of the Federal Housing Finance Agency (FHFA), which would have direct effects on the implementation of proposed GSE refinancing programs.
Here’s what you said:
A number of readers, including “Lemmie” and “Shannon,” feel that what is good for the goose is good for the gander and that Republican senators are being “hypocrites” when they protest these recess appointments. “Kathryn” took that a step further, though, saying that it was “wrong when the Republicans did it, and when the Dems objected to it as illegal, and it’s wrong now.”
“Larry” supported the move, saying simply, “H*LL YEAH!”
“David” and several others, on the other hand, point out that if the appointment was “legally rejected by the Senate in accordance with the Constitution and in light of the checks and balances between the three branches of government” then the appointment could have serious problems.
Finally, “Joseph” bemoaned the political nature of the news coverage in general and wonders “Who are you to opine on the legality of the appointment?” BEREL thinks that every citizen of the United States should “opine” on this and every aspect of our government in order to become more informed, more effective, and more productive members of society. We’re glad you’re reading and forming educated opinions about real estate, investing and legislation today and hope you continue to do so!
Missed this controversial article? Check it out here for all news coverage and commentary.
Thank you for reading the Bryan Ellis Real Estate Letter!
Your comments and questions are welcomed below.
I am surprised by the rhetoric and uninformed opinion/argument regarding the “unwinding” of Freddie and Fannie due to the damage done in the “sub-prime” meltdown and its contribution to and responsibility for same. Mortgage pros know that the whole subprime market would not exist but for the GSEs. They established the “conforming and conventional” guidelines whose restrictions gave way to alternative and “sub-prime” lending practices. The GSE’s standards for credit, requirements for income documentation and LTV guidelines locked-out at least 35% of would-be home-buyers. Alternative lending practices enabled mortgage financing for many who could not properly or completely document their income or show strong-enough credit scores for a GSE-conforming loan. Why the refusal to point the finger at the real culprits. Deregulation allowed for the creation of relaxed lending guidelines, which in-turn provided an opportunity for Wall Street investment bankers to raise billions of dollars for mortgage-backed securities (remembering when the security of real estate collateral was the holy-grail for raising capital). The available dollars and the motivation to get those dollars to market fueled the homeownership marketplace. President Bush, in his state of the union address boasted of “unprecedented homeownership,” the highest percentage in US history. That achievement could only take place with relaxed (deregulated) mortgage lending guidelines; non-conforming, “sub-prime,” Alt-A lending… How did these Non-Conforming loans get packaged and sold to Fannie-Freddie servicers? How did they make their way to the GSEs? Were they improperly documented and included in portfolios of loans that SHOULD have conformed to guidelines crafted by & for the GSEs? We know there were extraordinary monetary incentives to originate these loans – from Wall Street down to the retail firing-line. A lot of money was made placing these loans. Even more money was made defrauding the GSEs into buying, backing, insuring them. Now we are working to “do away” with Fannie & Freddie… Why? Really – Why? Why should the GSEs have to play whipping-boy for the sins of Wall Street and corporate greed? Have they once again trumped common-sense? Perhaps it would be wiser to simply reintroduce the sensible mortgage lending guidelines once strictly followed by Fannie-Freddie underwriters. Perhaps consequence should befall the true culprits and not the popular consensus… Or does the pendulum have to swing to the extreme, reactive, knee-jerk, position of misplaced-blame…
The real culprits, which you allude to, are many of the politicians – both Democratic & Republican – who boasted about high home ownership and how wonderful it was and how their policies had helped promote it. A perfect storm of political influence wanting higher home ownership, Wall Street able to make a buck selling junk but making it look like a prized possession and common sense eliminated from the GSE’s.