Who Pays Someone to Loan Themselves Their Own Money?
(answer) The Obama Administration and the U.S. Congress of Course – read more.
Recently, a Huntsville Examiner associate was interested in remortgaging a home as rates continued to decline. She had a 5.750% conventional loan for 30 years, never missed a payment and a pretty good credit rating with little liability.
After checking Bankrate.com in March, 2013, she saw that the rates had dipped significantly from a previous refinance.
After calling a few banks, she was quoted a 3.03% fixed rate from a local lender. It sounded too good to be true but she applied anyway only to be told that her credit score was not high enough.
However, the lending institution counter offered with a 20 year fixed rate at 3.25% and of course the lender took the offer.
What was the risk? ie; a nationwide FDIC insured bank and a reduction of more than $200 in future monthly mortgage payments plus a 20 vs 30 year mortgage. Approval and closing triggered the first payment on May 1st with absolutely no risk.
Immediately upon making that first payment, the lender received a notice of reassignment, (a sale and/or transfer of loan to Fannie Mae) from the local loan office, who had sold the mortgage to the agency involved in that often forgot-about sub-prime mortgage meltdown.
The applicant was a recent asset management specialist and fund manager for an international brokerage firm and had a good understanding of the process. The following are some of the conclusions made by that analyst and mortgage applicant whose story the Examiner tells:
- This is the same company (Fannie Mae) that sponsored some of the WAMU, Countrywide, Lehman Brothers and other mortgage service contracts that went bankrupt.
- Fannie Mae and Freddie Mac received billions in taxpayer money to stay solvent in the form of TARP assets that were provided from taxpayer funds approved by the Congress giving taxpayers a perceived vested interest in these two companies.
- Both Fannie and Freddie are GSE’s, Government Sponsored Enterprises, that by current definition are owned by taxpayers through government intervention.
- In theory, the lender actually underwrote their own loan with taxpayer dollars at a rate equal to a net receipt (a bonus) of 3.25% meaning that the government was collecting an interest fee from banks and financial holding companies as part of the TARP taxpayer bailout plan, and virtually paying new mortgage qualified applicants an additional 3.25% for loaning themselves their own money — what a deal on paper!
With that said, if there actually was a way for a taxpayer to collect interest payments on tax dollars spent to bail out Freddie Mac and Fannie Mae, a mortgage recipient would be getting their mortgage for free, that is, receiving a payback for being a new mortgage holder plus using a standard tax exemption for interest paid on their IRS form 1040 annual tax filing.
These are unintended consequences and represent another gross failure demonstrated by the government in all tax revenue not collected because of failed bailouts, failed promotions of the same loans that collapsed the system in the first place, failure to allow institutions to go bankrupt and a failing redistribution of wealth policy.
. . . and by the way, the same loan policies that bankrupt mortgage institutions in the late 2000’s and reduced property values by more than 40% are the same policies just put in in place again by the Obama Administration . . .
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