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Thread summary:

Fannie Mae: lending easing, home loans, added liquidity, experienced investors, investing class

 
Old 02-23-2009, 03:23 PM
 
Location: Chino, CA
1,458 posts, read 3,040,553 times
Reputation: 555

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Housing can't drop too low, investors won't allow it

Quote:
The government-sponsored enterprise told lenders last week that starting next month it will buy or guarantee home loans made to borrowers that have mortgaged as many as nine other properties. Currently, Fannie will not touch a loan if the borrower has financed more than three other homes.

The change is meant "to bring added liquidity to the investor segment of the market and help hasten the recovery," Fannie said.

However, the GSE, which said it wants to make more loans available to "high-credit quality, bona fide … experienced investors," is tightening other requirements for this type of borrower. Starting in June, an investor will have to hold six months of payments in reserve, rather than two months, to get a single-family loan approved by Fannie's automated system.
Fannie Eases Its Investor Loan Rules

Yes, the investing class is really taking over the GSE, gov co, and the markets. Yes, make it easier for the investing class... and make it harder for the middle/ upper middle.

Inflate the money supply and take in people's savings. Then crash the money supply and deflate assets and buy assets to rent them out.
The common folks aren't going to get lower home prices... and they'll get out bid by the investors. The continuation of wealth drain from the masses by the elites.

I'm beginning to see the pattern that gwynedd1 has been talking about.
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Old 02-23-2009, 04:29 PM
 
2,197 posts, read 6,892,708 times
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Isn't it the government that's taking from one class and giving to another? People don't own Fannie or have any influence over its lending-- the government does. Why shouldn't investors receive loans, as long as they are well-qualified, provide full documentation, have ample downs and can meet the new, more stringent regulations. Some investors are a lot more qualified than those first-time homeowners that the government is rushing to give loans to with hardly any scrutiny at all. Plus, investors pay a higher rate, so they're hardly getting a deal. First-time homeowners pay 3%; an investor will pay more than double that.

Isn't the goal to make loans to the most qualified prospects-- whoever that may be-- to reduce inventory and stem the foreclosures?
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Old 02-23-2009, 04:59 PM
 
Location: Chino, CA
1,458 posts, read 3,040,553 times
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Quote:
Originally Posted by goodbyehollywood View Post
Isn't it the government that's taking from one class and giving to another? People don't own Fannie or have any influence over its lending-- the government does. Why shouldn't investors receive loans, as long as they are well-qualified, provide full documentation, have ample downs and can meet the new, more stringent regulations. Some investors are a lot more qualified than those first-time homeowners that the government is rushing to give loans to with hardly any scrutiny at all. Plus, investors pay a higher rate, so they're hardly getting a deal. First-time homeowners pay 3%; an investor will pay more than double that.

Isn't the goal to make loans to the most qualified prospects-- whoever that may be-- to reduce inventory and stem the foreclosures?
Thanks goodbyehollywood for always helping put things into perspective and forcing me to clarify my answers or retorts.

Defining wealthy, rich, elite, investor class is far harder than defining the middle class, etc. Median income is pretty easily determined... but pin pointing a line between wealthy and middle becomes harder but I'm sure there is an "official" definition.

The problem that I see from what the GSEs are doing in influencing lending standards is this...

What they are doing is swinging "favortism" more towards people and entities that are more wealthy AND extending what the wealthy can do.

If previously someone had to have 2 months of reserve, and now they've tripled it to 6 months... guess who that favors? Then further, they increase the numbers that investors can take on. So, by these actions alone, they've shifted requirements and they've extended allotments furthering swinging favoritism to the more wealthy.

In terms of credit rating, responsibility and fiscal strength, the two guys are probably both relatively strong and could both take on the investment. But, now the 6 month guy totally trumps the 2 month guy.

If the goal was to reduce inventory and stem foreclosures, they could of just extended the allotments of investment property. Then they have the same pool of investors but now encourage them to "stabilize" the market.

Both the guy with 2 months reserves and 6 months reserves would be considered "investors" and both would have higher rates than home owners so the higher rate argument would be invalid.... of course... the guy with more capital also probably gets lower rates since they can probably put in more capital.

Lastly, investors these days aren't even individuals... they are large property investment entities that are funded through REITs, investment banks, and other such entities.

Basically these actions stick it to the previous qualified investors, AND the first time home buyers that are waiting for prices to fall... or the ones bidding now, but are being trumped by these investment entities.

-chuck22b
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Old 02-23-2009, 05:03 PM
 
Location: southern california
60,031 posts, read 78,443,756 times
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Quote:
Originally Posted by chuck22b View Post
Housing can't drop too low, investors won't allow it

Fannie Eases Its Investor Loan Rules

Yes, the investing class is really taking over the GSE, gov co, and the markets. Yes, make it easier for the investing class... and make it harder for the middle/ upper middle.

Inflate the money supply and take in people's savings. Then crash the money supply and deflate assets and buy assets to rent them out.
The common folks aren't going to get lower home prices... and they'll get out bid by the investors. The continuation of wealth drain from the masses by the elites.

I'm beginning to see the pattern that gwynedd1 has been talking about.
you are right. however it is the tendency of a drunk sailor to get ripped off in port it happens a lot. yes i loath those people that take advantage of them, but wouldn't it be better if they stayed away from risky places and stayed sober? we are a lot like that aren't we. but instead of booze we use credit cards to get high off of consumerism. and that is how we lose our houses.
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Old 02-23-2009, 05:16 PM
 
Location: Chino, CA
1,458 posts, read 3,040,553 times
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Quote:
Originally Posted by Huckleberry3911948 View Post
you are right. however it is the tendency of a drunk sailor to get ripped off in port it happens a lot. yes i loath those people that take advantage of them, but wouldn't it be better if they stayed away from risky places and stayed sober? we are a lot like that aren't we. but instead of booze we use credit cards to get high off of consumerism. and that is how we lose our houses.
The problem with this is:

When the rich guys get drunk, they have their aides take the fall, and have the little guys carry them home.

Where's the repercussions for the drunk wealthy? What about their even more excessiveness?

-chuck22b
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Old 02-23-2009, 06:16 PM
 
2,197 posts, read 6,892,708 times
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I see where you're coming from, chuck22b. Most of the investors I know are individuals, who own rental properties as a retirement strategy. They generally have a very difficult time getting a loan and must pay a higher rate for it-- as much as 2 percent higher. And now that the flippers have given the word "investor" such a horrible reputation, it's hurting these middle and upper middle class investors who're just trying to earn a little extra income, save for retirement and pass something of value along to their kids.

So on one hand, I wish the rules would be different for people versus companies, but OTOH, we need to move some of this inventory and that means selling to those most qualified to obtain financing. I just hate to see middle class investors get squeezed out and, actually, it's a good idea for investors to have a six-month reserve. There are so many maintenance and other issues with property that cash-poor borrowers often find themselves in a hole and keep digging deeper and deeper trying to get out. And the guy with more capital doesn't get a better rate. You would think so, but that's not the case. You can put 50% down and still pay a lot more than an FHA buyer with 3% down. It's a crazy time in the mortgage industry.
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Old 02-23-2009, 06:30 PM
Status: "ABCDEFGplus" (set 13 days ago)
 
18,859 posts, read 16,686,686 times
Reputation: 7365
Quote:
Originally Posted by chuck22b View Post
Housing can't drop too low, investors won't allow it

Fannie Eases Its Investor Loan Rules

Yes, the investing class is really taking over the GSE, gov co, and the markets. Yes, make it easier for the investing class... and make it harder for the middle/ upper middle.

Inflate the money supply and take in people's savings. Then crash the money supply and deflate assets and buy assets to rent them out.
The common folks aren't going to get lower home prices... and they'll get out bid by the investors. The continuation of wealth drain from the masses by the elites.

I'm beginning to see the pattern that gwynedd1 has been talking about.


Hi chuck22b,

Yes this is exactly what I had said would happen. Credit will be made available to a debtor class. However this is a middle tier or conduit. The goal for finance is being achieved on two fronts.

One is to remove smaller competition as we have seen with smaller bank failures and acquisitions. Which ever banks survive will be selected by the Federal Reserve and treasury. What they will have purchased with this current distress is consolidation.

The second noticeable event is the shift from equity. Banks have no stake in equity and they will create more money than anyone can save. Fractional reserve loans will drive out any buyers with savings that cannot possibly compete. The owner will owe the bank. With the equity stripped from homes the new owners will own primarily through finance, collect the rent and pay interest to the banks. The debtor class can be thought of as the tax collector for the financial class. We have seen this. Anyone saving for 20% down failed to have a winning bid on the house. Anyone with the same income who took a 110% loan will own the house and be a larger net debtor.
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Old 02-23-2009, 07:52 PM
 
Location: Chino, CA
1,458 posts, read 3,040,553 times
Reputation: 555
Quote:
Originally Posted by goodbyehollywood View Post
I see where you're coming from, chuck22b. Most of the investors I know are individuals, who own rental properties as a retirement strategy. They generally have a very difficult time getting a loan and must pay a higher rate for it-- as much as 2 percent higher. And now that the flippers have given the word "investor" such a horrible reputation, it's hurting these middle and upper middle class investors who're just trying to earn a little extra income, save for retirement and pass something of value along to their kids.

So on one hand, I wish the rules would be different for people versus companies, but OTOH, we need to move some of this inventory and that means selling to those most qualified to obtain financing. I just hate to see middle class investors get squeezed out and, actually, it's a good idea for investors to have a six-month reserve. There are so many maintenance and other issues with property that cash-poor borrowers often find themselves in a hole and keep digging deeper and deeper trying to get out. And the guy with more capital doesn't get a better rate. You would think so, but that's not the case. You can put 50% down and still pay a lot more than an FHA buyer with 3% down. It's a crazy time in the mortgage industry.
Hi Goodbyehollywood,
After thinking about it, the GSEs are actually promoting institutional ownership of homes vs. the common guys you were talking about. Who's income actually could cover 9 homes/properties? and still have 6 month reserves for ALL of them? I would say the institutional ownerships/investment trusts. I have a feeling REITs are going to do pretty well in the near future.

On another note, two months or 6 months really doesn't matter. Given credit and incomes the same for both guys as qualifying and exceptional, both investors should be able to take on the investments.

The fear of common folk investors IMO was not caused by the irresponsibility of the 2-month reserve investors or the inability to take the load and meet the obligations ... but the proliferation of zero down, back-loaded finance vehicles (such as option ARMs, Alt-As, etc.). Now that those aren't available, why the fear of the 2-month reserve investors?

If two months of reserve was fine in the in the pre-bubble times for decades... then why would it be any different for someone with a fixed loan with 20%+ in down payments and 2 months of reserve? Doesn't really make sense. I know there's this "false" sense of security having a guy with a bit more capital on reserve... but seriously, the ability to maintain the properties as income properties are relatively the same if the properties invested in actually generate incomes.

And, btw, they only need this 6 month reserve when they get the loan... I feel like a new ponzi scheme is starting to be enabled for the REIT and institutional RE investment groups. Like I said, if their goal was really to absorb inventory they would just expand the qty and keep lending standards the same. Instead, they effectively reduced competition for large investors and increased the load for RE investment groups.

-chuck22b

Last edited by chuck22b; 02-23-2009 at 08:17 PM..
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Old 02-23-2009, 08:05 PM
 
Location: Great State of Texas
86,068 posts, read 76,119,599 times
Reputation: 27635
It's a transfer of wealth ..there will be no middle class when they are done. We will end up with a 2 class system.

Right now cash is king and living way under your means now means you are "rich".
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Old 02-24-2009, 12:27 AM
 
Location: Conroe, TX
684 posts, read 1,960,132 times
Reputation: 193
Quote:
Originally Posted by HappyTexan View Post
It's a transfer of wealth ..there will be no middle class when they are done. We will end up with a 2 class system.

Right now cash is king and living way under your means now means you are "rich".
You are so right, HappyTexan...the conversation at the "office water cooler" these days is not who has the most.....(whatever..) but who has the most liquidable equity, true (time aged) real estate equity, and the old "cash in fist" to create liquidity at any given moment...a middle classes version of a (tarnished) "golden parachute"
And if you, by some amazing means, are able to sock away a buck or two in the midst of this turmoil, then you are, as you say...the nouveau riche.....

pretty f***ing scary.....huh???
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