Saturday, July 9, 2011

Fannie Mae and Freddie Mac possible merger introduced in new bill

It's been an interesting topic going back to 2009 and today, legislation was introduced by Republican Representative Gary Miller of California and Democratic Representative Carolyn McCarthy of New York to merge Fannie Mae and Freddie Mac. This would create a single entity allowing the government held organization to collectively purchase mortgages and sell them to investors as government backed securities.

The new entity would seemingly operate in a not-for-profit setup, creating a “secondary market facility” for residential mortgage loans. Secondary Market Operations is no news to us however the idea is ... Operating costs would be supported by buying home loans and then pooling them into bonds sales which would generate income. All realized profits would be returned to the U.S. Treasury. Banks would pay a “guarantee” fee on loans which would also serve to financially support the new entity. The plan claims to address severe losses by requiring investors to pay a fee to finance an insurance fund.

Read the full story here:

Rep. Miller said, “we don’t want Congress meddling,” so the bill notes the new operation would be governed by a presidentially appointed board.

Thursday, July 7, 2011

Fannie Mae courts Investors with Cash-Out Refinancing program

You know, these are all the bad guys who ran up home prices to their own profit, with no concern for the inevitable fallout; they colluded with overzealous, borderline blind, lenders who gave anybody and everybody a loan with no attention paid to their ability to repay said loan.

That's all over now. You can't get a loan without pledging your first born in collateral, and if you're an investor, you rank somewhere just below Angelo Mozilo.

Or do you? Last month Fannie Mae made a little change in the rules for all-cash buyers to apply for mortgages. I don't recall a press release, and I'm quite sure I'm on their mailing list. But there it is, "Announcement SEL-2011-5," a "Selling Guide Update:"

Currently, Fannie Mae requires a minimum of six months to elapse between the time a borrower purchases a home and subsequently applies for a cash-out refinance.

The Selling Guide has been updated to allow a cash-out refinance within six months of a purchase transaction when no financing was obtained for the purchase transaction.

There are of course all kinds of parameters, including maximum LTV (loan-to-value ratio), documentation, arms-length transaction and "all other cash-out refinance eligibility requirements and cash out pricing applied." The mortgage cannot be larger than the value of the home of course.

Read the full story here: