RCM Comment: We here at RCM have uncovered the mystery behind the housing troubles in the U.S. We have heard countless explanations and witnessed our colleagues struggle with the conundrum. Well, the super sleuths that we are, we have leaped the why in a single bound and here it is, get ready… “Barney Frank, the Massachusetts Democrat, is chairman of the House Financial Services Committee”:
Changes urged to rules on condo loans – WSJ
Democratic lawmakers are calling on Fannie Mae (FNM) and Freddie Mac (FRE) to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery. In March, Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70% of the units have been sold, up from 51%. Fannie Mae also won’t purchase mortgages in buildings where 15% of owners are delinquent on condo association dues or where one owner has more than 10% of units, which the firm sees as signals that a building could run into financial trouble. Freddie Mac will implement similar policies next month. In a letter to the chief executives of Fannie and Freddie, Reps. Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, and Anthony Weiner (D., N.Y.) warned that the 70% sales threshold “may be too onerous” and could lead condo buyers to shun new developments. (Isn’t that the point? New developments that are shaky need to stop so all the supply from overbuilding can come back into equilibrium with demand.) The legislators asked the companies to “make appropriate adjustments” to their underwriting standards for condos.
RCM Comment: Once again Barney illustrates his complete ignorance, stupidity, philistinism (Click here to continue the cathartic release) with regard to anything resembling sound economics. Has Barney learned nothing from the crisis? Last year I watched him accuse Fannie and Freddie of the very same weak lending practices he is now championing. We ask: Can anyone be this obtuse? What’s the hidden agenda? Will we find out Barney stands to benefit financially if condo communities are artificially inflated?
Let’s not forget that Freddie and Fannie are bankrupt entities. Any reduction in lending standards will likely lead to another trillion of losses. Who will pay for that? The American tax payer. Thanks Barney! Sixty-four thousand dollar question: When will Barney’s constituents wake up and vote him out of office?