Fannie Mae (FNMA)

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Mortgage loan proposal a bad idea
22 minutes ago


Current American taxpayers are becoming the largest, the most prolific— and the most abused — financial backers in the history of our republic.

When President Clinton signed the Community Reinvestment Act in 1977, it encouraged lending institutions to meet the borrowing needs of all segments of the community with little regard for their ability to pay. Local lenders made the loans, many times with a minimal down payment, so some borrowers had very little equity in their homes and simply walked away if they were unable to make the payments. Congress created the quasi-public mortgage agencies Fannie Mae and Freddie Mac to purchase the loans from the banks because the only safe way to lend to someone who is broke is to get the government to guarantee it.

Eventually, Fannie and Freddie had accumulated roughly $5 trillion in mortgage assets and needed a $188 billion bailout from the taxpayers. They did pay back a portion last year.

Congress has a short memory. The “affordable housing” crowd is once again urging more taxpayer subsidies for housing.

To solve the problem, Democratic Senator Johnson and Republican Senator Crapo have proposed a plan that basically forces prime borrowers to pay far more than the true cost of their mortgage insurance so sub-prime borrowers can pay far less, even though they have defaulted five times more often. It is another form of income redistribution.

Taxpayers lost approximately $40 billion in the Troubled Asset Relief Program which included bailouts of the auto industry, wall street banks and the housing market in 2008-09. A majority of those losses were with GM where $ll.2 billion is considered gone, and with AIG where $13.5 billion is considered nonrecoverable.

One interesting aspect of the GM loan is the U. S. and Canadian governments eventually earned back about 80 percent of what they had loaned. The UAW pension fund, the Democratic Party’s second-largest constituency (after the teachers’ unions) was paid in full. GM bondholders, the U.S. Citizens who lent their savings to the company so it could live up to its union obligations received 10 percent, forfeiting 90 percent to the unions.

Incidentally, almost 60 percent of used car loans are now sub-prime and financed over 60 months.

So, last year, according to economist Porter Stansberry, $18 billion of car loans were securitized and sold to investors, thereby moving the risk from the financing companies to investors And the beat continues.

Looming on the horizon for taxpayers is the student loan fund which is now $1.1 trillion in debt. Many students today have learned they can have their basic living expenses funded as long as they remain in college. Pay As You Earn students can basically borrow an unlimited amount, cap their monthly payments at 10 percent of their discretionary income and then have their loans forgiven after 20 years of productive work in the private sector or 10 years of work for a nonprofit or the government.

The Obama Administration’s regulatory costs are now the world’s 10th largest economy although you won’t see this “tax” mentioned in any federal budget. Last year 3,659 new regulations were issued — or approximately two every business hour. Total cost to the taxpayer last year was estimated at $1.84 trillion by the Wall Street Journal. In comparison, Canada’s GDP last year was $1.82 trillion.

Taxpayers also will be spending billions of dollars bailing out insurance companies through Obamacare’s “risk corridor” program.

In the 1965 East Africa Journal, President Obama’s father wrote, “Theoretically, there is nothing that can stop the government from taxing 100 percent of income so long as the people get benefits from the government commensurate with their income which is taxed.”

Success, in the minds of progressives, is achieved only when government is growing at the same rate as entitlements. And a majority of American voters have twice voted to support Obama’s political philosophy of focusing inward to spread the wealth. But that is not the reason why the American capitalistic system has been the envy of the world and why immigrants are still climbing over fences to get in.
http://www.thenews-messenger.com/story/opinion/2014/08/29/mortgage-loan-proposal-bad-idea/14808707/