My letter to Mel Watt
Dear Mr. Watt,
First Congratulations on your appointment to Director of FHFA you certainly have a lot of work ahead of you.
I’ll get right to my point. I am a long term shareholder of Fannie Mae stock. As I know you are aware The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, was founded in 1938 during the Great Depression as part of the New Deal. Before Fannie Mae, housing finance was exclusively the realm of the private sector, it was short term loans with high down payments (approximately half the home’s purchase price), short maturities (10 years or less), and large balloon payments. It was nearly impossible to buy a home then, and would be now without Fannie and Freddie.
Fannie and Freddie are not the culprits in this economic crisis, it was the to big to fail banks that gave Americans loans that they couldn’t pay back or never intended to. Here is my person experience with that:
1) In 1993 I applied for a home loan, I had the same job for 14 years, had good credit and the payment was well within my means, I provided proof of employment income, years of bank statements and tax returns, the process took weeks and was questioned right up till closing to make sure I qualified.
2) In 1998 I applied for a home loan, the only thing different than 1993 was now I had had the same job for 19 years, but the same process applied, income verification, bank statements, tax returns, home appraisal.
3) Now lets fast forward to June 2005. I call my mortgage lender Citibank to get a home equity line of credit. I was in awe when over the phone my house was appraised at $630,000, and I was offered not the $75,000 I needed, but $400,000. I was responsible and took only what I needed knowing I would never be able to repay that amount of money.
The problem is not Fannie or Freddie but an egregious lack of lending standards, and then the loans being pushed off to Fannie and Freddie. This is fraud and the proof of this is evident in the fact that lawsuit's against these perpetrators have been won and fines and money repaid. Has justice been served? No! Normally those who commit fraud do a little prison time, not only is this "too big to fail" but too big to jail.
In closing Fannie Mae and Freddie Mac have taken the fall for what the “TBTF” banks perpetrated. These profitable companies and sources of the American home ownership dream need to be released from conservator ship and re-listed to the NYSE. I hope you make this your first priority.
Very truly,
Hollyk
