Thursday, November 5, 2009

Fannie Mae to Rent out Homes Instead of Foreclosing...

This is a complete and total government scam at the behest of the central bankers. It is so infuriating that I’m just going to post the article and then let Karl Denninger explain the situation as he has perfectly nailed it – in a nutshell it’s all an accounting scam, yet another attempt to delay the recognition of losses.

Fannie Mae to Rent out Homes Instead Foreclosing

Fannie Mae to allow troubled borrowers to hand over deeds to homes, let former owners rent

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.

The program will "eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities," Jay Ryan, a Fannie Mae vice president, said in a statement.

But the effort is likely to affect a relatively small number of homeowners. In the first half of the year, Fannie Mae took back about 1,200 properties through this process, known as a deed-in-lieu of foreclosure. That pales in comparison to the 57,000 foreclosed properties the company repossessed in the period.

While neither option is particularly attractive for the homeowner, a deed-in-lieu does less harm to the borrower's credit record.

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 Mae has hired an outside company, which officials declined to identify, to manage the properties.

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.

Fannie Mae's sibling company, Freddie Mac, launched a similar effort in March. That policy, however, requires the foreclosure to be complete and only allows month-to-month leases. A Freddie Mac spokesman declined to say how many borrowers have participated.


INSANE, complete and total fraud and theft. Here's Denninger:
WHERE ARE THE DAMN HANDCUFFS? (Fraudie)

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!

Thanks, Karl, couldn’t have said it better myself. Well, maybe I would have thrown in a couple extra SCAMS! Can you tell me how to get, how to get to Sesame Street? Maybe I can find a good "rental" to live in there...

Time to Play, Everything’s A-Okay…