Free Market's to Housing Rescue
3/10/2016
Big news: Bank of America (BAC) is creating a program to issue mortgage loans to folks with as little as 3% down without insurance from the Federal Housing Administration (FHA). This is a shot across the bow from an industry that’s ready to fight back against what they see as massive abuses of power. With major fines against Bank of America, JP Morgan, Wells Fargo, and Quicken Loans, they have slowed lending to a crawl. Quicken threatened to stop issuing mortgages altogether. Bank of America will work with the Self- Help Foundation, which will sell loans to Freddie Mac and share in losses from defaults. It’s a high-risk for the private organizations, but it’s the way markets are supposed to work. I worry about the extent of taxpayer exposure to this via government-owned entities. What happens if there is a mass default (2007-2010)? Right now, Fannie and Freddie are gutted for almost all the cash they net, making them an amazing piggy bank for the Federal government.
I like the notion that the private sector is stepping up or being allowed to step up after the private mortgage insured (PMI) market share crashed after the market collapse and government intervention. PMI Share:
The PMI market is looking very intriguing, even though many names are mere shadows of their former selves. That’s what makes them compelling. I am considering pulling the trigger, but we are doing more work and we want to see better mortgage purchase demand.
Is there a new housing bubble or is the free market back in the mix? What are your thoughts on the housing market and the role of private sector and taxpayers? Click here to let us know your thoughts
Charles Payne
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