Freddie, Fannie, WaMu Mortgage Probe & Related
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Cuomo Widens Mortgage Probe, Taps Fannie, Freddie (Update1)
New York Attorney General Andrew Cuomo broadened his nine-month investigation of the mortgage industry, issuing subpoenas to Fannie Mae and Freddie Mac seeking information on loans they bought from banks including Washington Mutual Inc.
Cuomo is demanding Fannie Mae and Freddie Mac, the two biggest U.S. providers of home loan financing, hand over details of loans they buy that may show appraisal values on homes were illegally inflated.
The attorney general said he uncovered a ``pattern of collusion'' between lenders and appraisers and said he is targeting banks beyond Seattle-based Washington Mutual. Fannie Mae and Freddie Mac agreed to supply documents, Cuomo said, giving the attorney general access to information on some of the $11.5 trillion of mortgages they own or guarantee.....
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Cuomo Widens Mortgage Probe, Taps Fannie, Freddie (Update1)
New York Attorney General Andrew Cuomo broadened his nine-month investigation of the mortgage industry, issuing subpoenas to Fannie Mae and Freddie Mac seeking information on loans they bought from banks including Washington Mutual Inc.
Cuomo is demanding Fannie Mae and Freddie Mac, the two biggest U.S. providers of home loan financing, hand over details of loans they buy that may show appraisal values on homes were illegally inflated.
The attorney general said he uncovered a ``pattern of collusion'' between lenders and appraisers and said he is targeting banks beyond Seattle-based Washington Mutual. Fannie Mae and Freddie Mac agreed to supply documents, Cuomo said, giving the attorney general access to information on some of the $11.5 trillion of mortgages they own or guarantee.....
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U.S. House panel endorses home appraisal standards
The U.S. House of Representatives Financial Services Committee on Wednesday voted to create new standards for home appraisers aimed at eliminating fraud and inflated estimates of house values.....
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From Calculated Risk-
NY AG: WaMu "Improperly pressured appraisers"
Includes link to press release from Attorney General Cuomo
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At this point, I know I can go to any financial institution and get a low fixed rate conforming loan. However, if Fannie gets caught up in this mess and the financial markets sour to Fannie's paper, even us borrowers with stellar credit and savings are going to have a tough time.
I think you are missing the big picture. The more lenders (including Fannie and Freddie) hurt, the better it will be for those with good savings and stellar credit.
Look at it this way, if Fannie severely cuts back on lending that will just put even more pressure on housing prices (i.e. because fewer people will be able to get loans thereby reducing demand even more). Heck, in the worst case scenario where Fannie stops lending altogether (something I view as highly improbable) a modest nest egg of $50,000 might be able to buy a newish downtown Bellevue condo free and clear!
Let's put this another way: there will ALWAYS be someone willing to lend money for mortgages for those with good down-payments, a great job history, and stellar credit. It just might be that the standards continue to ratchet up. Instead of requiring 10% down, lenders might require 40%. But don't panic hearing how tight the standards might eventually become: the tighter the standards are the cheaper real-estate will be (i.e. because fewer people will qualify for mortgages). I would much rather make a 40% down-payment on a $100,000 home rather than a 20% down-payment on the same house with a $200,000 price tag.
Article offers insightful perspective on how this situation could evolve into something really ugly for the entire mortgage lending industry -
From Calculated Risk:
WaMu and the Rep War
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Here, here! The best thing for you, if you do not currently own, is a massive tightening of lending standards followed by years of relaxation back to more recent standards. As sniglet says, if banks require 50% down, then you can only sell for a price which some interested people actually have 50% of.
Financial markets tend to overreact in both directions. If things get bad enough, the credit markets might determine that it is impossible to separate good loan candidates from lousy ones. Default rates are rising even for people with good credit scores and documented income.
There might be a couple of years where interest rates shoot up and even conforming money dries up, but prices stay put or only drop a little. I'm plenty patient, but at some point my wife's going to insist we pull the trigger on a purchase. If the standoff takes 3, 5, or 7years to resolve, I'm going to have some convincing to do.
I don't see what the problem is. If lending really does completely dry up and freeze you out from being able to buy a home then you won't have any "convincing" to do at all: you won't be able to buy a home no matter what. At that point you won't have any choice but to sit back and keep renting until prices fall enough to catch up with the new reality of super-tight lending criteria.
In the alternative scenario where you ARE able to qualify for a mortgage over the next few years then I don't think you will have much problem convincing your wife to keep waiting before purchasing. In fact you will likely have a problem getting your spouse to agree to buy a home at all after there has been a couple years of blood in the streets from the real-estate downturn. Just look at how quickly buyers are vanishing in places like California and Arizona. People in those places are now becoming SCARED that a home they buy today might be worth less in 6 months.
On the way up all the pressure from friends and family was to buy, as everyone kept talking about how much money they were making from their homes. On the way down this process reverses. Interestingly, I am seeing this first hand in my own home. My wife used to feel humiliated when her friends would talk about the fortune they made selling their home (and buying an even more expensive one). Recently, however, her friends are telling her about being stuck with 2 mortgages, and having to reduce prices on their listings.
I get the feeling that in the near future we all may know people in the same situation or worse.
Apparently the couple met with their financial advisor who broke the news that they bought too much house. Maybe the pastor & teacher can cash in some stock options to cover the new payment?!? Since when do pastors need financial advisors?
Still, whenever Mrs. Laxtosnoco and I review our finances, the question about timing for buying a house comes up. The scenario you mentioned where we can't buy because the credit markets tank isn't going to make the wifey very happy when we *could* buy right now.
It's very simple: just tell her you should wait at least a year to buy. Point her to all the articles of problems with real-estate, and the growing downturn in the Puget Sound. Don't even mention how there is a possibility that things could get SO bad you couldn't even buy.
By this time next year the whole discussion about buying a house will be moot and there will be so much negative news about real-estate that you would have to beg your wife to let you buy.
Still, I wouldn't stress about the implausible scenario where you couldn't get financing to buy. If such a thing were to occur, who WOULD want to buy anyway? Real-estate would have to be in such a massive tail-spin that only a moron would buy since prices were dropping substantially month by month. That is a problem you would like to have...
Would you rather have bought a house now (when financing was available) only to realize that it had lost half it's value (if that debacle occurs where no one can get a mortgage)?
What we all want to see: The contract between Fannie Mae and WaMu, to see if Fannie would have allowed WaMu to shift liability to a third party vendor. If not, then WaMu is going to be in deep trouble.
The big winners in all this will be the lawyers.
The good news is that they are gaining market share on their competitiors (as I have seen the numbers).
As for you dreamers, wow, some of your ideas have gone of the hypothetical deep end! If the markets seize up as you indicate housing will be the least of your problems, the economy would have to be in a super depression (most likely caused by a nuclear bomb as the only way I could see that happening). Unemployment would be at 55% and even you wouldnt be able to buy a house. Not anything I would wish on any region of the country or world.
so in other words, by buying at $15 as you say you would, you'd be violating the rules.
not market timing means you buy ratably over time, no matter what the price.
I seriously doubt you have any info substantive enough to trade on, but you pretty much contradict yourself in the space of two posts as to what you can or should do.
Since I work with the Board of Directors for companies I do have quite a bit of non-public info and would never trade on it, our accounts are checked. Others in the office usually ask before they trade certain stocks anyways just to be safe.