If At First You Fail Miserably & Blow Up The Financial System, Do It Again!

Via Jim Quinn's The Burning Platform blog,

Having government entities provide low down payment mortgages to people who can’t afford to buy a house is always a good move.

Keynesians like Krugman approve wholeheartedly. The housing market will get a nice boost and the working taxpayers will fund the bad debt through Fannie and Freddie. You own Fannie and Freddie. Everyone wins.

In case you forgot, the closing costs to sell a house are usually 8% of the home price. So these home buyers are immediately 5% underwater when they move in.

Sometimes I can’t believe I live in a world this fucked up. And no one notices and no one cares.

Where are the Republicans we elected to stop this shit?

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Guest Post by Anthony Sanders

Fannie and Freddie officially approve 3% down payment mortgages (for 1st time homebuyers and lower incomes)

Here we go again! Mortgage giants Fannie Mae and Freddie Mac have now officially approved 3% down payment mortgages.

According to Brena Swanson at Housing Wire,

“The new lending guidelines released today by Fannie Mae and Freddie Mac will enable creditworthy borrowers who can afford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgage with 3% down. These underwriting guidelines provide a responsible approach to improving access to credit while ensuring safe and sound lending practices,” FHFA Director Mel Watt said.

“To mitigate risk, Fannie Mae and Freddie Mac will use their automated underwriting systems, which include compensating factors to evaluate a borrower’s creditworthiness. In addition, the new offerings will also include homeownership counseling, which improves borrower performance. FHFA will monitor the ongoing performance of these loans,” Watt continued.

What are these compensating factors? Lower down payment mortgages required higher credit scores among other things. Also, the 3% down loans are intended only to first-time buyers, buyers who haven’t owned a home for at least a few years and those with lower incomes. Many of the loans will also require borrowers to undergo home-buyer counseling before making a purchase.

But will this work? Not unless the labor market increases substantially.