Government residential real estate finance is the subject. Whether that is a proper role for government is one question; another is whether government is the dumb patsy that makes the smart guys rich. Let’s start with a video Ron Tomsic sent me yesterday, The Indymac Slap in Our Face, on the Think Big Work Small website, which tells of the profitable, rent-seeking relationship between the Federal Government and a Goldman Sachs/George Soros bank, OneWest Bank. Since these fellows are playing fast and loose with your money, please link to the video before reading on.
To verify the government locked in profit given to these Obama fat cats, I checked with Mark Toomey, our real estate finance expert. Mark’s comment:
“I’ve seen this video at least twenty times this week. Sadly, it’s pretty accurate. The $75,000 note from the consumer may reflect a judgment against the borrower for a non purchase money second and if that’s the case, I highly doubt they’ll ever collect it; more than likely, it will be included in the inevitable BK the consumer is headed toward.”
Worse yet seems to be the regulatory snafu our bureaucrats at Fannie/Freddie, the Fed, and HUD have caused with conflicting regulations the incidental benefit of which will be to keep the trial lawyers in business. Another Democratic constituency!
Mark continues: “Honestly, I think the bigger story is one the media will not pick up on for another two weeks. Residential lending has been virtually shut down in the last week now that the new GFE regulations have been fully enacted. Three dueling regulatory bodies have merged in to the perfect storm. My weekly conference call with the fixed income guys at Blackrock have turned in to a death watch of sorts; the scenario’s I laid out to them in December (ones at which we all laughed) have now come to pass, and we may very well be looking at the last decent funding month for residential mortgages nationwide. The pre-pay speeds have dropped off the table in the last ten days, and it is getting worse. Kiss getting a VA loan good bye.”
(Definitions: “GFE” means good faith estimate typically dealing with all essential and non-essential elements of a real estate closing. “Pre-pay speeds” mean the anticipated rate of pre-payments assumed by secondary market buyers of mortgage pools.)
Mark concluded with his dark Irish humor: “Greece today, New York tomorrow. Guns and gold, Tom, guns and gold.”
When government gets into businesses it shouldn’t be in the opportunities for incompetency and fraud are multiplied exponentially. The favored fat cats of the liberal left, Wall Street, trial lawyers, unions, etc. profit and all from your tax dollars! Truly a wonderful system we have.
Tom Motherway