by John Galt
July 4, 2017 02:00 ET
The screen shot pictured above is from the end of the hit movie, “The Big Short.”
It could just as easily said:
“In the end, we all get fucked by the man.”
America has taken a dramatic shift away from the crash of 2008. Everyone thought that once the banks were bailed out, General Motors and Chrysler nationalized (in an un-Constitutional manner), and the so-called mortgage bail out for homeowners where “qualified” homeowners in select markets were able to re-finance their 15 and 30 year mortgages into 40 and 45 year mortgages (or longer) that everything was fine and ‘Amuuuurica’ was on the road to recovery forever.
So let us just start the chant now, “U.S.A., U.S.A…..” blah, blah, blah…
CDO’s, CMBS, CLO’s, MBS, etc. did not go away; they were just re-branded, repackaged and the worst of the crap forced upon the taxpayer to purchase not via the TARP program (a joke) but due to the Federal Reserve destroying America’s savers via monetary inflation while adding $4 trillion to its balance sheet to de-leverage some of the banks exposure and force the U.S. Treasury to take the risk should the underlying securities begin to deteriorate further into delinquency. The idea of accelerating the inflationary curve to prevent a massive hyper-deflation in 2009 seemed to be the only out at that time and then Chairman of the Federal Reserve, Ben Bernanke, saw no alternatives thus putting the yoke of the reflation on the back of savers while strategically devaluing the currency at the same time.
It hurt the Republican Party dearly in the 2008 election, cost America billions in lost income and jobs, and worse, redefined the American judicial system to adjudicate the needs of “crisis” versus the rule of law in the Constitution.
The theory by Bernanke and the leadership of the 2008-2009 era was that once they put a patch on the broken problem, there was no chance America would act that stupid again.
We didn’t learn a damned thing from the crash of 2008.
From the Bristol Courier (VA) via the Washington Post group on June 18, 2017:
Several major lenders are offering 1 percent down payment loans, and now a large national mortgage company has gone all the way, requiring absolutely nothing down. Movement Mort-gage, a top 10 retail home lender, has just introduced a financing option that provides eligible first-time buyers with a non-repayable grant of up to 3 percent. This allows applicants to qualify for a 97 percent loan-to-value ratio conventional mortgage — essentially zero from the buyers, 3 percent from Movement.
To illustrate: On a $300,000 home purchase, a borrower could invest nothing from her or his personal funds, while Movement contributes $9,000 from its resources. The loan terms also permit seller contributions toward the buyers’ closing costs to help swing the deal. Duke Walker, branch manager for Movement for the Washington D.C. area, told me that although the program is brand new, it’s already “going great guns.”
Movement is hardly the only player in this arena. Navy Federal, the country’s biggest credit union, has offered members zero-down mortgages for years in amounts up to $1 million. NASA Federal Credit Union also markets nothing-down mortgages. Quicken Loans, the third highest volume lender according to Mortgage Daily, a trade publication, offers a 1 percent down option, as does United Wholesale Mortgage, another large national lender. The U.S. Department of Veterans Affairs also has been doing federally guaranteed zero-down loans for years.
Oh, yes, that ended oh so well in 2007-2009, right?
But it gets worse. The same reporter for the article above, Kenneth R. Harney, followed up with a more alarming piece a few days later in the Washington Post:
Keep in mind this is the same Fannie and Freddie that taxpayers have already taken a bath from the 2005-2009 crash and housing crisis, and the very same GSE’s (Government Sponsored Enterprises) that the Democrats and Republicans do not wish to privatize because it keeps the Federal government in control of over 20% of America’s real estate under lien. This is great when everyone makes their payments, but when someone can take out a loan without an appraisal?!?!?!
Excerpted from the link above:
With no formal public announcement, Freddie Mac on June 19 began phasing in its plan to transition to appraisal-free mortgages for certain loan applications. Although the program is limited initially to some refinancings, Freddie expects to expand the concept to home purchases in the coming months. Under the program, borrowers no longer will have to pay hundreds of dollars for a professional appraisal — a reversal of long-standing mortgage-industry practice. There will be no traditional appraisal charges at closing, and lenders no longer will be required to assume responsibility for the accuracy of home valuations. As of now, the program is limited to refi applicants who have at least 20 percent equity in their homes and are not pulling out cash.
Fannie Mae, the other government-supervised financing giant, has been quietly offering no-appraisal refinancings for months. Both companies emphasize that they permit waivers of appraisals only when they have substantial data on the property involved and the local real estate market. Fannie says it has a database of more than 23 million appraisal reports and uses “proprietary analytics” to come up with value estimates. Unlike Freddie Mac, Fannie Mae has not indicated whether it plans to expand its “property inspection waiver” concept to loans for home purchases, although industry sources say they expect it.
Mortgage lenders generally are enthusiastic about the moves. Dave Norris, chief revenue officer of loanDepot, one of the highest-volume retail lenders in the country, says “leveraging technology” to arrive at property valuations “gives consumers certainty” about the status of their application upfront, sharply reduces the time needed to get to closing, and saves money. Roughly 12 percent of loanDepot’s refinancings through Fannie Mae already are proceeding appraisal-free, Norris told me.
“Consumers definitely appreciate it,” he added. There’s “more cash in their pockets,” and the total experience is better.
So not only are we still issuing derivatives based on the housing industry contracts for sub-prime loans, we are now, as a nation, issuing sub-prime loans and calling them “prime” because the GSE’s said it was okay to do so; just like 2006-2007. To make matters worse, the delinquency rate is once again low in some markets buy higher in others as banks want to re-acquire some properties in the “hot” markets thus distorting reality. Why would a bank want to buy back a mortgage from the government GSE’s at 70% LTV in a toilet like Birmingham, AL when they can buy a property in a hot market like Orlando, FL at 85% LTV and make a profit on it?
Worse, there is no indication that enforcement of the new so-called Dodd-Frank regulations on the credit rating agencies have any teeth, hence why the desire to repeal them since they are worthless.
This is how the housing crisis was born in 2004 and accelerated in 2005 until it finally crashed. Welcome back to the future past my friends.
We didn’t learn a damned thing from 2008 and the problem is this time, the new crash which has begun already is different; and much, much worse.