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Fannie, Freddie Buying Fewer Bad Loans

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Reelestate

Thread Starter
Junior Member
Joined
Dec 16, 2006
Professional Status
Certified Residential Appraiser
State
Florida
In the old days the Bank had 80% of the risk and the homeowner had his 20% down payment at risk. With 0% down it was like the O'Hare trade in the Chicago commodity exchange. You put down a bet and go to the airport, and if the trade works you go to Hawaii or you go to Canada if it doesn't.

Now Fannie and Freddie are going to require 30% down to "Solve" the problem. This medicine is going to kill the patient.

"Fannie Mae recently imposed a 0.25 percent fee on all new home loans it buys or guarantees, and both companies have begun adding surcharges on loans to borrowers with credit scores below 680 and who are borrowing more than 70 percent of the home's value."

http://biz.yahoo.com/ap/071211/fannie_freddie_delinquencies.html?.v=2
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
It looks like PMI for that quarter point and FICO. It relates to a disconnect between US Treasury interest rates and mortgage rates. The spread has widen significantly reflecting credit risk concerns or repricing of risk.

It is also interesting to note that the LIBOR rates are significantly higher than US Treasury rates.

It all reflects the willings (or lack thereof) to lend.
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
If they buy less bad loans, does that mean the
executives will get smaller bonuses?
 
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