Is It Time To Shut Down Fannie Mae and Freddie Mac?
Fannie Mae and Freddie Mac have been government backed far too long.
They have already cost the taxpayers $187 Billion in their bailout.
There are members of Congress who are calling for the phasing out of Fannie and Freddie. They are saying that the private sector should be the ones involved with mortgage loans for homebuyers. I agree. And surprisingly, President Obama agrees.
President Obama said: “For too long, these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” Obama said of Fannie and Freddie. “Private capital should take a bigger role in the mortgage market — I know that sounds confusing to folks who call me a socialist.”
Of course many in the mortgage industry and I am sure that special interest groups in the housing industry are not in agreement. Even though we are in the business of real estate there are principles that are more important to us than our special interests. The main principle of free markets and free enterprise is paramount to a healthy economic environment. I vote first as an American before I vote as a REALTOR®.
Many people on both sides of the isle agree that the mortgage industry should be in the hands of the private sector and that government should not be involved with making loans or guaranteeing mortgage loans and that Freddie and Fannie expose great risk to taxpayers.
Last month a bill was passed that would end Fannie Mae and Freddie Mac. A committee spokesman from Congress said Tuesday that their bill would end “the largest bailout in history”, This would also phase out the government’s role in housing finance, thereby giving consumers more choices when shopping for mortgage products.
It is time for Fannie and Freddie to be phased out over the next five years.
21st Century Glass- Steagall Act Proposed by Senator tweeting that “Banks should be boring.”
She wants to force deposit-taking financial institutions out of the investment business.
The National Review reported:
Senators John McCain and Elizabeth Warren are giving it a shot. The Arizona Republican and Massachusetts Democrat last week unveiled their “21st-Century Glass-Steagall Act,” which would restore the barrier between commercial banking and investment banking first established by the Banking Act of 1933. That prohibition, known as the Glass-Steagall “wall” after congressional sponsors Senator Carter Glass of Virginia and Representative Henry Steagall of Alabama, was repealed by the Financial Services Modernization Act of 1999, legislation signed by President Bill Clinton.
The premise being that banks can be in the investment business but they won’t be able to be FDIC insured if they are.
Of course, when she was asked if this would end the “too big to fail” issue- she admitted that there is not much that can do that.
The investment bankers say that the Dodd-Frank regulations have pretty much taken care of investment banking issues. But that is their opinion. Dodd-Frank has done more to hurt buyers who want to buy houses and tougher and the Patriot Act makes it tougher for foreigners to buy real estate here. Many people don’t think that Dodd-Frank has stopped the “too big to fail” either.
Since 2010 when the Dodd- Frank bill was enacted-
“The four biggest banks are now 30% larger than they were just five years ago and they have continued to engage in dangerous, high-risk practices,” Warren said during a Senate Banking Committee hearing.
The lobbyists got a hold of the bill and it was so watered down by the time it was passed, that it is a “toothless” bill at the expense of Americans.
The problem with all of these bills, is that this happens time and time again. What starts off as sounding reasonable ends up being a pile of papers good only for the rubbish and that no one reads.
Sens. Sherrod Brown, D-Ohio and David Vitter, R-La., introduced a bill that would force “Too Big to Fail” institutions to hold more capital, which would reduce their leverage power and protect against significant losses. But again, what will end up happening?
Also, the Glass- Steagall act was from the 1930’s. Things are different now and when Glass-Steagall was the law of the land, we still had severe financial shocks like the savings and loan crisis, the Latin-American debt crisis, the collapse of the hedge fund Long-Term Capital and the 1987 stock-market crash.
As long as you have lobbyists paying all kinds of favors to politician and as long as you have politicians who accept those favors you will have laws with either no teeth or laws that hurt one sector in favor of another.
As long as you have cronyism: banks, corporations and big pharma sleeping in bed with the government you will not have any bills that favor the people of the United States of America.
Only when you truly have free market systems where failing is a part of business and is not bailed out, where free competition arises by consumers who make the decision to buy or not to buy and where the government takes its’ rightful place of protecting the rights of the “contract” and private property will this kind of behavior subside.
Fannie Mae Artificially Inflating Home Values???? Could it Possibly Be????
Does anyone learn from past mistakes? Does this sound at all familiar to any of us who here in the real estate boom and then the bust???
It appears that Fannie Mae is creating their own values through their Homepath program and through their outrageously laughable counter offers to short sales!
This is market manipulation. This is one of the reasons the real estate market crashed. So is anyone going to learn from the mistakes of the past? Or are they bound to repeat them?
When we list a short sale we make sure to market the property at the fair market value according to comps. All agents should know how to do this.
But Fannie Mae took away delegation authority of appraisals from the servicers and orders their own values. Let’s say we have a short sale that is listed at $189,000. How did we come up with that price?
Well, we take into consideration the solds in that neighborhood of similar properties and we make adjustments to those sold properties based on condition of the property, pool or no pool, lake view or no lake view, etc. That determines the price.
Once a buyer puts in their offer which will most likely in our market be full price at $189,000 we begin the negotiations on the short sale. If the investor on the property is Fannie Mae, they order a BPO on the property.
But the Fannie Mae counter offer comes back at $263,542!!!!!! How did that happen???? Well, ordinarily we would blame the BPO agent whom Fannie Mae ordered the BPO from.
Well, don’t attack the BPO agent so fast!!!
Agents that we know have found out from some of these BPO agents that they were TOLD by Fannie Mae what price to come back with!!!! WTH!!!!!???!!!!
Does this sound familiar to any of you who were in the real estate market back in 2005 and 2006????
Remember the mortgage brokers, lenders and banks were ordering appraisals from their buddies who would come back with appraisals of inflated values? That is why the government decided they needed to make more appraisal regulations. Those regulations included keeping the agents and mortgage brokers away from the appraisers ears. But we know that regulations always have unintended consequences because they are mostly made in haste without much though or sense.
Fannie Mae, according to agents around the country, are telling the appraisers and BPO agents to NOT take ANY short sales or REOs into consideration in their values. So let us get this straight… you have a short sale listing and Fannie Mae does not want that short sale listing to be compared to any closed short sales???? A short sale is a short sale is a short sale…
The average out of whack counter values are about $60,000 difference between list price and appraisal price by Fannie Mae. Fannie Mae is apparently dictating the market values. There just are not that many listing agents and brokers around the country that are 60K off all the time!
Fannie Mae does not want to do short sales and they have made this very clear through purposely inflating the values of the homes. They know darn well that even if the buyer accepts their outrageous counter offers the buyer’s lender is going to order an appraisal and that appraisal will reflect the real market value and the buyer will not be able to get the loan unless they are paying cash for the property.
So when the deals fall apart…. Fannie Mae gets to take the property back into their asset column, cook their books some more and then offer the property up for sale through their Homepath program which guess what!!!! DOES NOT REQUIRE AN APPRAISAL!!!!!!
Now, our next question becomes…. once that inflated market value loan is closed, do the appraisals moving forward on traditional sales and non Fannie Mae short sales reflect those inflated values? Most of the time the appraisers call us and ask us the details on our closed sales when they are evaluating the market value of a property.
Fannie Mae gets to make up its own rules.
Here we go…. again….
Wellington Short Sale Market Report – An Overview from 2007 to 2013.
Wellington Florida is a great place to live and is the first choice of many people moving to Palm Beach County Florida. When the South Florida market took a hit in the beginning of 2007 it affected every town in the tri-county southern part of our state.
We started to list short sale properties at an increased pace starting in September of 2007. There were a lot of short sales in 2008 through 2010. In 2011 Wellington was getting back up and prices started to stabilize. But of course, there were still many homeowners over 50% under water. You could easily find 200 short sale listings back in 2008 and 2009. In 2012 the market turned around and the prices started to go up again but not at the toxic pace from before the bust.
Today we are down to only 19 short sale listings for sale in Wellington. That is a huge drop.
There are three reasons for this:
1. The market has turned and so people are deciding to keep their homes and not selling them even though they are upside down. After all, a home is a home. It is not just an investment to many families and retirees.
2. Many homeowners have not paid their mortgage payments in several years, some upwards of 4 years and still get to live in their homes. This is going to stop soon because of new legislation to help speed along the courts processing the foreclosures. But of course, when there is no incentive to list a home as a short sale when you can wait it out as long as possible and save up your money to move.
3. The banks are not foreclosing on homes as fast. Wellington has a tough code enforcement division and the banks don’t want to pay the city for all the fines and code violations that REO properties are known for.
The highest priced short sale is listed at $1,499,000 on Sea Mist located in Palm Beach Point- an awesome equestrian gated community with homes on 5 acre lots.
The lowest priced short sale is listed at $179,900 and is an approved short sale that was just put back on the market in an older area of Wellington.
There are two short sales available in Buena Vida a 55+ community in Wellington. This is very unusual to have a short sale in Buena Vida. One home is listed at $350,000 and the one is listed at $280,000.
The Isles of Wellington is another nice gated community. There is one short sale available and it is an approved short sale. This home is listed at $325,000.
There are only three short sales now listed in Olympia of Wellington. Now that is the lowest number of short sales in Olympia in years! Olympia was the short sale factory as well as heavily dominated with REOs. This is because so many people bought on speculation in Olympia. Many people including agents bought 6 to 7 homes pre-construction and flipped the properties before they were built. But many people got caught holding the bag. They could not sell those properties when the bust happened. It appears that Olympia has come out of that phase and is now doing well.
Short Sale update- mortgage cancellation relief is extended for one year to January 1, 2014.
On January 1- the Senate and the House passed H.R.8 which is the bill to deal with the fiscal cliff.
So we have another year to be doing short sales with the mortgage balance being forgiven for tax purposes. In reality the debt relief act did not apply for IRS purposes to investors and second home owners. Most homeowners who are losing their homes are insolvent anyways so the IRS debt relief is not a huge benefit to them. It is used more as a political angle for special interest groups.
In other real estate related taxes as part of the new legislation there were a few changes:
There is a deduction for mortgage insurance premiums for income tax filers who make below $110,000. The deduction for mortgage insurance premiums is extended through the end of the year of 2013 and it’s also retroactive to cover 2012. New
Leasehold improvements for qualified leaseholds on commercial properties – 15 year straight-line cost recovery has been extended to the end of 2013 and made retroactive to cover 2012.
The energy efficiency tax credits for homeowners who make energy improvements on their existing homes is extended to the end of 2013 and made retroactive for the year 2012 with a tax credit of 10% up to $500.
Now here come my liberty busters and you will get some of my commentary here to:
There’s a permanent repeal of the “Pease Limitation”. Under the new H.R 8 legislation the agreement permanent repeals the limitations that reduce the value of itemized deductions except for it has been reinstituted for high income filers.
The high-income filers are those who make more than $250,000 and joint income tax filers who earn over $300,000. These are also going to be indexed for inflation and they will rise over time. The amount of your adjusted gross income above the threshold is multiplied by 3%. This amount is then used to reduce your total itemized deductions.
My biggest question always comes about taxation – is it fair to charge some people more taxes than other people? And why? What is there in our constitution that states that people can be treated differently based on their production? The biggest problem with this provision is that married couples are basically punished because if they were instead single people living together filing separately they could each get a $250,000 threshold for a total of $500,000 instead of $300,000. Again, I am married and would like to have equal benefit as two roommates living together but I don’t want special treatment. Just treat everyone equally.
Now in a lot of places in the country a couple would be living very well with the family of four at $300,000 annual income but they certainly would not be considered rich in most of the urban cities of this country. In fact, after they pay their state taxes (which we do not have in Florida) they are already being taxed at 60%. Do the math. Living in Manhattan with a family of 4 is not going to get very far on $120,000 annually to live on. I have not even gone into running a small business. That is a whole other topic of which I can discuss from experience on.
The only fair tax is a fair tax and that’s certainly not going to be implemented anytime soon.
Capital gains. Capital gains rate is going to be staying the same at 15% for those individuals up to $400,000 and $450,000 for joint filers. After that amount the gains will be taxed at 20%. For real estate capital gains the 250/500K exclusion for sale the process principal residence remains in place.
My opinion is that the money you invested is money you already paid tax on, so in essence, you are getting double taxation on your investments. I think this is cooked up by the banksters, wall streeters and the politicians to try to force you to keep your money in your investments because before you take it out, you are going to think twice. But for retired people they don’t have a choice. This is a huge disservice to retired people. Again, this is not treating everyone fairly in our tax structure.
Again we’re treating different people differently which is very unfair and is punishing people who want to take proactive measures for their own retirements and their own wealth.
The ever popular and unpopular estate taxes you are taxed when you die. Your family has to pay taxes when you die on whatever you left behind under these circumstances.
The first $5 million in individual estates and $10 million for family estates are now exempted from the estate tax. So we made a little bit of progress there but again we are not treating people fairly across the board and equally as Americans.
Anything over $10 million will be taxed at the rate of 40% up from 35% and those exemptions are going to also be indexed for inflation.
Needless to say I am not happy at all about the H.R.8 legislation. I believe there are too many special interests involved and too many people wanting to get back scratched along with government not making sound spending cuts and not working on the deficit. There is a total lack of responsibility on the part of our leaders. For every $42 in spending they are getting they are only cutting $1 of spending! DO THE MATH!!! How does that equate to financial responsibility. I would be out of business if I ran my business like that.
I am sure that NAR is happy with the outcome because they are a special interest group that lobbies for real estate interests. But whenever you get into I want this, the other side says, but I want this. As long as government makes deals with special interest groups and their cozy pals in big companies nothing will be fair. But if NAR really stands for “under all is land” and we must protect private property then NAR needs to stand to protect ALL private property. Taxation on private property especially real property violates the very principles of private property rights.
authored by Katerina Gasset
Florida Foreclosure Case- Homeowners Win in Appeal
A Florida appeals court sided with homeowners Cesar and Ruth Vidal in Broward County in south Florida. They have a home in North Lauderdale. The bank foreclosed on their home.
The homeowners took their case to the County Circuit Court where they lost and that court favored in behalf of the lender.
Then the homeowners appealed their case in the Fourth District Court of Appeals who ruled that the foreclosure must be overturned.
This is not the first homeowner that has won a case in Florida courts regarding their foreclosure.
Florida is a judicial state. We are also a deed state. This means that the banks must go through a judicial process of sueing the homeowner in court, called a lis pendens filing, and then the homeowner becomes the defendent. As the defendent the homeowner gets to bring forth a defense and a case to the judge about why the bank should not foreclose on them.
Now the fact is that it is not easy for the homeowner to win a case. If you are not making your mortgage payments you have defaulted on your promise to pay back the money you borrowed from your bank to buy your home. At the end of the day, the piper must be paid.
But this is why the judicial process is so important for us who own property in Florida. Be mindful of that and do what you can to keep supporting us to have a judicial foreclosure system. There are times when banks err and in non recourse states you don’t have a prayer.
The judge in the appeals court in this case also rules that the Vidals could continue to seek damages and try to have their mortgage canceled on the grounds that their lender, Liquidation Properties Inc allegedly violated the Truth in Lending Act.
We know of a couple other cases where judges have canceled the homeowners mortgage because of harrassment and violations of the Fair Credit Act. These cases are rare though so don’t go starting to make a case like this without good evidence in your favor.
Some people use the judicial process to delay the ultimate end reality that they are going to have to move out of their home. Again, this is better than not having a judicial process.
The banks complain that the judicial process takes too long here in Florida, the average time is over 800 days now. Some people want this to hurry up to stop the bleeding however we must always be careful of the unintended consequences of quick solutions. Stay vigilant in our rights to keep our judicial process.
The Vidal case though, could set a precedent and could affect thousands of homeowners which is a win for homeowners.
We are not attorneys and we are NOT giving any legal advice, we are just reporting the news.
South Beach Miami Condo Short Sale- 727 14th Place- Park Vintage Condo SOLD and CLOSED.
Original Asking Price $169,777 in September 2010
Lowered price in increments until we got to $149,000 before we got an offer.
Buyer offered $124,500 in March 2011.
Buyer seeking financing, FHA loan from Wells Fargo.
During our short sale evaluation with the seller – we recommended the HAFA program because he met the requirements for HAFA short sale.
Chase serviced the loan. Chase is very slow on HAFA deals in South Florida.
Chase countered buyer’s offer at $144,000.
Buyer accepted the counter.
Then Wells Fargo ( the lender for the new buyer) did their appraisal.
Appraisal comes back at $117,000.
We go back to Chase with new appraisal. Chase will get less than this as an REO.
Chase lowers the price to $117,000.
There were issues with FHA and the Condo Association’s Hazard Insurance policies.
We had to go back to Chase for extensions to the closing. Issues are resolved.
Seller was approved for HAFA so he got $3000 and no deficiency. He was SO happy that he was getting the $3000 because he really did not believe that was going to happen after all the lies that were told to him by Chase during his loan modification process in 2010.
But the night before closing- the closer from Chase called us to tell us that they had $20,000 more than what they needed to net so we could give that $20,000 to our seller at closing!!!!
So our seller received $23,000! You should have heard him on the phone as we told him this awesome news!
– Do not work with businesses or individuals who instruct homeowners not to contact their lenders, lawyers or financial counselors and to make mortgage payments directly to the business or individual.
– Avoid businesses that use names or symbols which mimic federal and state programs or falsely suggest they offer legal services or are affiliated with an attorney or law firm.
– Before doing business with any loan modification business, check it out fully. Get its physical address, ask for the names of its corporate officers, and call the Attorney General’s Office to determine whether it has any complaints reported against it.