Apparently GSE regulators have come to the conclusion that if loose lending got us into this mess, loose lending can get us out. Here’s a couple of goodies this week.
First, "We don’t need no stinking appraisals":
Fannie Mae and Freddie Mac, the mortgage-finance companies seized by the U.S. government, are considering forgoing new appraisals on refinanced loans to help struggling homeowners, their regulator said.
“If they refinance someone, rather than doing a loan mod, do they need a new appraisal if they already have the credit?” Federal Housing Finance Agency Director James Lockhart told reporters after a speech in Washington today. “That’s an issue that’s being discussed. They’re looking at it.”
Fannie and Freddie, which own or guarantee $5.3 trillion of the $12 trillion U.S. home loan market, must consider that some homeowners who need to refinance owe more than their property is worth and wouldn’t qualify for the necessary mortgage insurance, Lockhart said. Another consideration is the issue surrounding the valuation of refinanced loans on the companies’ balance sheets.
“It sounds like a disaster,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia. “What you’re doing is postponing the problem into the future and not giving the system time to fix itself,” he said, adding that regulators are bowing to political pressure.
Then, if that’s not risky enough, James Lockhart of the FHFA is saying that one of the agencies is considering going back to the 10 unit limit for investors from the recent four unit limit:
James Lockhart, who runs the agency, says there’s been some "re-thinking" underway on the controversial limits on the numbers of rental properties investors can own if they’re seeking new financing.
Both Fannie Mae and Freddie Mac have imposed a four-unit limit, reversing their previous investor maximum of ten units.
The rationale for the change, according to the agencies, was their belief that investors who own higher numbers of rental condos and houses pose a greater risk of default, foreclosure and loss for the companies.
The restriction effectively shut out many small investors from Fannie’s and Freddie’s standard programs — and pushed them into much higher-cost financing from so-called "hard money" lenders.
In a letter to Charles McMillan, president of the National Association of Realtors, Lockhart said, "While no final decisions have been made, I can share with you the fact that the issue of raising the selling guide ceiling on investors loans is under active consideration at one of the (corporations), and reflects an appreciation of the role for investors in the housing recovery."
Apparently no risk is too great for the agencies any more. They are clearly more interested in getting people in a house today than worrying about whether they will still be in that house tomorrow.
Mish's Global Economic Analysis
UK House Bubble
Ohio Fraudclosure
Bubble Meter
Northern Virginia Housing Bubble Fallout
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
actually, if applie right, this change would make sense. Investors making substantial downpayments on properties with reasonable cashflow are not the big risk to FHA, lowdownpayment owners who end up underwater are. I have half a million dollars I plan to invest near the bottom of the phoenix market, and I would prefer to leverage it aobut 3 to 1, so 30% downpayment is fine for me…
And now for something completely different. If you’re interested in the facts linking Obama to Blagojevich, here is a letter I wrote to Patrick Fitzgerald:
Dear Mr. Fitzgerald:
Today you told the press, in connection with the Blagojevich arrest, “We were in the middle of a corruption crime spree and we wanted to stop it.” And yet most of the complaint is based on evidence you have had for a number of years. In other words, if the matter concerning the appointment of a Senator were removed, you would still have had enough evidence to indict Blagojevich. In fact, the complaint shows that you have enough evidence for a number of years.
This means that you and no one else, allowed Blagojevich to continue on a “crime spree” long after you had enough evidence to arrest him. Indeed, he would never have gotten to the point at which he was about to sell a Senate seat, if you had arrested him earlier. Why did you not do so? Why did you allow him to commit more crimes?
And now you are about to show the same negligence again. You are apparently about to make the same mistake with regard to Barack Obama. As you probably know, Evelyn Pringle has published detailed online articles concerning Obama’s participation in “Operation Board Games” crimes. Below, I reproduce paragraphs from your own Blagojevich complaint, and after them, a section from the Pringle Obama articles dealing with precisely the same facts as the complaint.
Her articles show in detail that Obama has committed the same 18 USC 1346 crimes you discuss in your Blagojevich complaint. And yet he has not yet been arrested. Why not?
Just as you allowed Blagojevich to get to the point where he was about to sell a United States Senate seat, so you allowed Obama to be elected President, and apparently you are willing to let him continue his own crime spree by actually becoming President.
It was irresponsible for you to continue to allow Blagojevich to continue in office when you had enough evidence to arrest him, and it is irresponsible of you now to allow Obama to continue in office and become President, when you have enough evidence to arrest him.
Arrest Obama now. It is irresponsible of you to wait any longer.
Sincerely yours,
John Ryskamp
I. FROM THE BLAGOJEVICH COMPLAINT
35. As described more fully in the following paragraphs, Mercy Hospital, which sought permission from the Planning Board to build a hospital in Illinois, received that permission through Rezko’s exercise of his influence at the Planning Board after Rezko was promised that Mercy Hospital would make a substantial campaign contribution to ROD BLAGOJEVICH. Rezko later told a member of the Planning Board that Mercy Hospital received the permit because ROD BLAGOJEVICH wanted the organization to receive the permit.
36. Levine’s criminal activities included his abuse of his position on the Planning Board to enrich both himself and Friends of Blagojevich. The Planning Board was a commission of the State of Illinois, established by statute, whose members were appointed by the Governor of the State of Illinois. At the relevant time period, the Planning Board consisted of nine individuals. State law required an entity seeking to build a hospital, medical office building, or other medical facility in Illinois to obtain a permit, known as a “Certificate of Need” (“CON”), from the Planning Board prior to beginning construction.
37. Levine, as well as Planning Board members Thomas Beck and Imad Almanaseer, testified under oath at the Rezko Trial.9 Beck testified that he asked Rezko to reappoint him to the Planning Board and that Beck thereafter followed Rezko’s directions regarding which CON applications Rezko wanted approved. Beck testified that it was his job to communicate Rezko’s interest in particular CONs to other members of the Planning Board, including Almanaseer, who were loyal to Rezko. Beck testified that he understood that Rezko spoke for the Blagojevich administration when Rezko spoke to Beck about particular CONs. Almanaseer testified that Beck instructed him that Rezko wanted Almanaseer to vote a particular way and that Almanaseer should follow Levine’s lead in voting on CONs. Almanaseer testified that before certain Planning Board meetings, he received notecards from Beck indicating how to vote on certain CON applications. Beck testified he provided these notecards to Almanaseer and certain other members of the Planning Board to communicate Rezko’s directions about certain CON applications.
38. During his testimony, Levine described a plan to manipulate the Planning Board to enrich himself and Friends of Blagojevich. The plan centered on an entity commonly known as Mercy Hospital (“Mercy”) that was attempting to obtain a CON to build a new hospital in Illinois. Levine knew the contractor hired to help build the hospital. In approximately November 2003, on behalf of the contractor, Levine checked with Rezko to determine whether Rezko wanted Mercy to obtain its CON. Rezko informed Levine that Mercy was not going to receive its CON. According to Levine, he asked Rezko whether it would matter to Rezko if Mercy’s construction contractor paid a bribe to Rezko and Levine and, in addition, made a contribution to ROD BLAGOJEVICH. Levine testified that Rezko indicated that such an arrangement would change his view on the Mercy CON.
39. Levine’s testimony regarding Rezko’s actions to change the Planning Board decision concerning Mercy’s application for a CON based on contributions for ROD BLAGOJEVICH is confirmed by attorney Steven Loren. Loren testified at Rezko’s criminal trial and, before that, in the grand jury.11 According to Loren, in approximately December 2003, Levine informed Loren that Rezko was against the Mercy CON. According to Loren, Levine relayed to Loren a conversation between Rezko and Levine during which Levine asked Rezko whether a political contribution to ROD BLAGOJEVICH would make a difference for Mercy’s CON, and Rezko responded to Levine that such a contribution might make a difference.
40. Thereafter, and confirmed by the testimony of Levine, Beck, and Almanaseer, as well as recorded conversations, Rezko switched his directions to Beck and informed Beck that Mercy was to receive its CON. According to Almanaseer, although he previously had been told by Beck that Rezko did not want Mercy to receive its CON, he was later told that there had been a change and that Rezko now wanted Mercy to receive its CON.
41. Mercy received its CON as a result of a controversial and irregular vote at a public Planning Board meeting.12 The vote brought significant publicity to the Planning Board and ultimately led to the disbanding of the Planning Board. Almanaseer testified under oath in the grand jury that not long after the Planning Board vote on Mercy’s CON he saw Rezko at a fundraiser. According to Almanaseer, he was still embarrassed about what had occurred at the Planning Board vote on Mercy’s CON and Rezko’s role in the vote. Almanaseer testified that he asked Rezko why Rezko had switched the vote on the Mercy CON. According to Almanaseer, Rezko stated: “The Governor wanted it to pass.”
II. FROM EVELYN PRINGLE’S “CURTAIN TIME” ONLINE ARTICLES
Tony Rezko is a private citizen. Therefore, the evidence presented in the trial focused on his influence over officials in getting members appointed to the Boards. Prosecutors did not discuss how the legislation got passed that enabled the Planning Board to be set up in a way that allowed for the appointment of members to rig the votes to begin with.
That part of the scheme will likely be detailed in future indictments, probably starting with Blagojevich. Blagojevich signed the Illinois Health Facilities Planning Act with an effective date of June 27, 2003. However, before he could sign the act, a bill had to be passed by the Illinois House and Senate. As discussed fully in Curtain Time Part II, Obama was the inside guy in the senate who pushed through the legislation that resulted in the Act.
Obama was appointed chairman of the Senate Health and Human Services Committee. The minute the bill was introduced, it was referred to his committee for review. The sponsors of the bill also served on this committee with Obama. Within a month, Chairman Obama sent word to the full senate that the legislation should be passed.
On May 31, 2003, Senate Bill 1332 passed and specified that the “Board shall be appointed by the Governor, with the advice and consent of the Senate.” The legislation reduced the number of members from 15 to 9, paving the way for the appointment of a five-bloc majority to rig the votes.
The corrupt members appointed included three doctors who contributed to Obama. Michel Malek gave Obama $10,000 on June 30, 2003 and donated $25,000 to Blagojevich on July 25, 2003. Malek also gave Obama another $500 in September 2003.
Fortunee Massuda donated $25,000 to Blagojevich on July 25, 2003, and gave a total of $2,000 to Obama on different dates. After he was appointed, Dr Imad Almanaseer contributed a total of $3,000 to Obama. Almanaseer did not give money to Blagojevich.
When the first pay-to-play scheme was put in play, and the application for approval of a new hospital was submitted, the Department of Human Services, along with four other Illinois agencies, sent recommendations that the project should be approved even though experts said the hospital was not needed.
During the trial, Rezko’s attorney presented an email exchange to the jury that hinted at Obama’s role in setting up the scheme. The exchange showed that Obama and seven other top Illinois politicians consulted on the legislation passed in 2003 and were involved in recommending the members for the board.
Matthew Pickering wrote the memo to Blagojevich’s general counsel, Susan Lichtenstein, on behalf of David Wilhelm, a former chairman of the Democratic National Committee, who headed Blagojevich’s 2002 campaign for governor.
Pickering said he and Wilhelm had “worked closely” over six months with state legislators. The memo recommended the appointees listed above and stated, “our attached recommendations reflect that involvement” with the political leaders.
The persons appointed to rig the votes, including those who contributed to Blagojevich and Obama, are cooperating in exchange for immunity or lighter prison sentences.
Feds shut down pay-to-play schemes
Only two pay-to-play schemes succeeded before the Feds swooped in and shut them all down. Blagojevich did not receive the $1.5 million from the Planning Board deal because the hospital was never built.
But Obama received $20,000 from the first kickback paid in the pension fund scheme and the straw donors used to funnel the $10,000 payments, Elie Maloof and Joseph Aramanda, also made $1,000 contributions to Obama’s failed run for Congress in 2000.
In addition, Aramanda gave $500 to Obama’s senate campaign on June 30, 2003. In the summer of 2005, Aramanda’s son landed an intern position in Obama’s Washington office.
Obama also received contributions for his senate campaign from the two persons appointed to rig the vote on the pension fund board. On June 30, 2003, Jack Carriglio contributed $1,000, and the other appointee, Anthony Abboud, donated $500 on June 30, 2003, $250 on March 5, 2004, and $1,000 on June 25, 2004.
The person chosen to funnel the kickback in a future scheme, Michael Winter, donated $3,000 to Obama on June 30, 2003.
All these people are also cooperating in exchange for immunity or lesser prison sentences but prosecutors pointed out during closing arguments that people who entered into agreements with the government are required to tell the truth or all deals are off.
John R, evidence and proof are sometimes not the same. It appears to me he was still collecting evidence that could be turned into proof. To arrest a sitting govenor is a very scary prospect. To impede the political aspirations of a presidential candidate is beyond scary. We all know when he goes after someone he goes after someone. Blag looks like a guilty man. Only in Chicago! The new pres is much sharper, I believe.
Azrob-
“Applied right” would be the key, wouldn’t it?
I suspect their data showed that they were experiencing higher rate of default among investors with more than four properties- otherwise, why would they have made the change?
There’s no intrinsic reason that more properties means a higher rate of default, so I’m going to suspect that the problem is the types of loans that they are making to investors.
It doesn’t sound like they are changing standards though, so my guess is that they are being pressured to accept the higher default rates.
I doubt “applied right” is going to happen.