New Generation Lending was conceived about 6 months ago based on the fact that our government is too involved in every aspect of the mortgage industry. Even before the government actually comandeered Fannie Mae and Freddie Mac, their involvement was too much. I have actually felt this way for years because really, what's the difference between being a Government Sanctioned Enterprise (GSE) with preferential treatment or actually being run by the government? There is just too much opportunity for corruption. Heck, the Head of the Congressional Finance Committee had an affair with one of the head guys at Fannie Mae. And now he wants to dismantle them also. A lover scorned?
Don't get me wrong, we need regulation and oversight and we need to maintain fairness and equality when providing home loans to consumers. But that should be for protection of the consumer, not bailing out banks with consumer money because the government stepped in with "entitlement not rights" to own a home.
I am not surprised that sooner or later all of the finger pointing that has occured in the mortgage industry finally got around to the ultimate culprits. Fannie Mae was directed really with making sure that everyone, that means EVERYONE was able to own a home and a piece of the American Dream, whether they could afford it or not. The thing is that the push began with Lyndon Johnson and travelled through Jimmy Carter and got a final push from slick Willie Clinton. There was no fore-thought placed on the fact that if you continue to place debt behind debt, which is how Fannie Mae raises or recycles money, sooner or later, if you mix that concept with high risk loans, it will FAIL.
Owning a home is a right . It is not an entitlement.
If we go back to this way of thinking then we will make loans to people that will not take their home ownership lightly and will earn their right to ownership. Which, in turn will stabilize the housing market, which as we have now seen is a big part of our economy. $12 Trillion worth. Mortgages were originally conceived as long term investments amortized to make homes more affordable. Let's get this thing grounded again.
When Fannie Mae securitizes mortgage notes into bond issues and sells them to institutional investors, the money invested originates from the people and is placed in to the economy by the institutional investors (asset managers, pension funds, etc.). The people are also the taxpayers. Currently the taxpayers are at a loss of $111 Billion to bail Fannie Mae.
Now let's pretend that the government wasn't involved in this industry. If loans were made using private investment, through the same institutional investors with the same money from the people, then what has changed? We have just accomplished the same process without the government cost, red tape, debt and in -efficiency. For the investor there is a fair return. But the money cycle continues. We just can't make dumb loans.
The asset managers may say that they need the guarantees that the government provides. We saw how those guarantees worked. The banks are still being paid back for bad loans that they made, while being pushed by the government to turn a blind eye to risk. What a vicious cycle! I'm a firm believer that if the borrower is at risk (for their down payment or equity) then they will fight to keep what's theirs. 100% financing so EVERYONE can own a home was never going to work. Not for the lender and not for the consumer.
Fannie and Freddie are too cumbersome. They are a dying dog. Put them out of our misery.
Go ahead, shoot the dog. No more suffering. We need a New Generation!
Fannie Proving To Be A Loser
Shut Up Barney
House Of Cards
