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Thread: US gov't may become largest 'landlord' ...

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    Banned Melonie's Avatar
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    Default US gov't may become largest 'landlord' ...

    keep in mind that this comes on the heels of Freddie / Fannie losing $18+ billion dollars in the latest quarter and requesting billions of additional US taxpayer dollars for yet another bailout ... see

    (snip)"Fannie to Rent to Owners in Foreclosure

    Fannie Mae will allow homeowners facing foreclosure to stay in their homes and rent them for as long as a year, as part of the government's latest effort to help troubled borrowers, while keeping more foreclosed properties from hitting the housing market.

    The "Deed for Lease" Program lets borrowers who don't qualify for loan modifications transfer their property to Fannie Mae in exchange for a lease. Borrowers-turned-tenants will pay market rents, which in most cases are lower than the cost of mortgage payments, and might be offered extensions when their leases expire.

    Fannie Mae wouldn't say in its Thursday announcement how many homeowners it expects would take advantage of the program. The company acquired 57,000 properties through foreclosure during the first half of the year.

    Borrowers have to demonstrate they can't afford their current mortgage, but can pay the rent. The borrower's mortgage servicer has to show the borrower didn't qualify for a loan modification"(snip)

    (snip)"The move by Fannie follows a similar effort by Freddie Mac that began offering month-to-month leases to owner-occupants who had lost their homes to foreclosure. The Fannie Mae program differs in one important respect: Fannie's foreclosed homes won't be listed for sale. In February, both companies began allowing tenants whose landlords had lost their properties to foreclosure to sign month-to-month leases."(snip)

    (snip)"Separately, Fannie Mae said Thursday it would need an additional $15 billion from the U.S. Treasury after it posted an $18.9 billion net loss for the third quarter, as loans made to prime borrowers deteriorated at a faster clip. That infusion would bring the total cost so far of Fannie's bailout to $61 billion.

    In the past year, the government has invested more than $110 billion in Fannie and Freddie, and it has pledged to invest as much as $200 billion in each company to keep them afloat."(snip)

    from


    Arguably, this plants the seeds for a huge new de-facto taxpayer funded Section 8-esque subsidized housing program ... but for 'their own' houses ! Renting / leasing to the delinquent homeowner results in a huge ongoing cash flow loss to Fannie / Freddie, prevents Fannie / Freddie from recovering any additional cash via sale of the property, etc. ... with these losses ( representing the difference between monthly mortgage payments due versus monthly rental / lease cost ) being dumped onto the US taxpayer via a series of never-ending bailouts.

    ~
    Last edited by Melonie; 11-07-2009 at 09:45 AM.

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    Default Re: US gov't may become largest 'landlord' ...

    with additional commentary by 'calls em like he sees em' Karl Denninger

    (snip)WTF is this?

    Thousands of borrowers on the verge of foreclosure will soon have the option of renting their homes from Fannie Mae, under a policy announced Thursday.

    The government-controlled company, through its new "Deed for Lease" program, will allow borrowers to transfer ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that.

    This has exactly nothing to do with helping "homeowners."

    It is entirely about Fannie not having to recognize the written-down value of these houses - that is, allowing them to hold the "mark" on the loan at it's original value, rather than recognize the loss.

    The rental program is designed to help homeowners who don't qualify for a loan modification under the Obama administration's plan, but still want to remain in their homes. Fannie Mae is not planning to market the homes for sale during the one-year rental period.

    Fannie won't sell the properties because then they would have to recognize the mark.

    This is nothing other than yet another scam to avoid recognition of bad paper Fannie took on their books and has a HUGE embedded loss.

    To qualify, homeowners have to live in the home as their primary residence and prove that they can afford the market rent, which would be determined by the management company. The rent can't be more than 31 percent of their pretax income.

    Oh, so the rent can't be more than 31% of their pretax income, but the original note's payment was, right? After all, if it wasn't then the homeowner wouldn't have been in foreclosure in the first place!

    That's the key paragraph, and tells you that:

    •This is simply an attempt to avoid mark-to-market on the properties.

    •The rent charged will be insufficient to meet the PITI (Principal, Interest, Taxes and Insurance) on the original note, as by definition if it could the "homeowner" wouldn't have defaulted in the first place!

    This is yet another scam folks, all courtesy of our government who will do anything to avoid admitting the extent of the liabilities that are now in Fannie and Freddie's portfolio (and by extension, partially in The Federal Reserve as well!)

    But the economy is getting better, right?

    That's why we keep seeing scheme after scheme, scam after scam, all intended to do one and only thing - avoid a true and accurate accounting of losses that have already occurred.

    And the market roars - it spiked a full 1% on this announcement - on yet more government-sanctioned and legalized fraud.

    IF the economy was truthfully improving we wouldn't need any of these schemes. Honest profits would be sufficient to both support the housing and stock market. The fact is those honest profits simply do not exist, and neither does the value of these "assets" support the loans outstanding against them.

    IF the government gave a damn about these homeowners they would instead reset the loan to the discounted cash amount of that market rent and re-write the loan at that same 31% of the homeowner's income. Of course that would force recognition of the fact that the property isn't worth anywhere near what the loan balance is, and thus force Fraudie and Phoney to EAT the bad paper they're holding.

    Scam scam scam scam scam - it's all good for the banks and oligarchs, while the average American is dispossessed of his house!"(snip)

    from

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