This could 'end very badly': Trump officials warn on mortgage finance

Fannie Mae and Freddie Mac are way too undercapitalized, and lending standards have actually deteriorated since the housing crash, the officials said.

11.9.2019

Fannie Mae and Freddie Mac are way too undercapitalized, and lending standards have actually deteriorated since the housing crash, Trump administration officials say

Fannie Mae and Freddie Mac are way too undercapitalized, and lending standards have actually deteriorated since the housing crash, the officials said.

Share on Twitter The U.S. housing finance system is worse off today than it was on the cusp of the 2008 financial crisis, Republican lawmakers and Trump administration officials warned on Tuesday. Fannie Mae and Freddie Mac, the two government-controlled enterprises that stand behind half the country's mortgages, are way too undercapitalized, and lending standards have actually deteriorated since the housing crash, the officials said. Story Continued Below “This whole thing is a car wreck. It’s a dumpster fire,” Sen. John Kennedy (R-La.) said at a Senate Banking Committee hearing on the White House’s proposal to overhaul the way the nation finances mortgages. “We spent $190 billion of taxpayer money, and we’re in worse shape,” he said, referring to the bailout of Fannie Mae and Freddie Mac, which were seized by Treasury a decade ago to stave off catastrophic losses in the crisis. The hearing kicked off what promises to be a highly contentious debate over the plans released last week by the Departments of Treasury and Housing and Urban Development to scale back the federal government’s massive role in the mortgage market. Republicans are focusing on what they say are growing risks in the system, while Democrats are mostly concerned about providing affordable housing. The Treasury blueprint would overhaul Fannie and Freddie before releasing them from government control. A major component of the plan is building the companies’ capital so they would be able to withstand an economic downturn without turning to taxpayers again. Right now, the companies are only allowed to retain a combined $6 billion in capital despite owning or guaranteeing $5.5 trillion of mortgages. “I will tell you as a safety-and-soundness regulator, when I look at a $3 trillion institution that is leveraged 1,000 to 1, it keeps me up at night,” Federal Housing Finance Agency Director Mark Calabria, the companies’ regulator, told the committee. “If we do nothing, this is going to end very badly,” he added. Political intelligence on Washington and Wall Street — weekday mornings, in your inbox. Email Sign Up By signing up you agree to receive email newsletters or alerts from POLITICO. You can unsubscribe at any time. What’s more, Fannie and Freddie are less equipped for a downturn now than they were before the crisis, Senate Banking Chairman Mike Crapo (R-Idaho) said. Before 2008, he said, the companies held 45 cents in capital for every $100 in mortgages; today that figure is 19 cents. Treasury Secretary Steven Mnuchin, HUD Secretary Ben Carson and Calabria all agreed with Crapo’s assessment that the GSEs “are systemically important companies [and] that they continue to be too big to fail.” Yet when Sen. Mark Warner (D-Va.) pressed Mnuchin and Calabria on whether the Financial Stability Oversight Council, the uber regulator created after the crisis to spot emerging risks in the financial system, should subject Fannie and Freddie to greater oversight, they rejected the idea. “Before we raised public capital, we would make sure we understood that there was enough capital so that they did not need to be designated” as "systemically important" by FSOC, Mnuchin said. “It appears to me from your administrative proposals, we could end up with a system that actually doesn’t end too-big-to-fail and doesn’t increase affordable access to credit — that is a grave concern to me,” Warner said. The administration’s plan, he said, is “going to put us right back to where we were prior to 2008.” Mnuchin disputed Warner’s characterization, and he and Calabria emphasized that the White House plan includes reforms to reduce the risk in the companies’ portfolios. As it stands, underwriting standards at Fannie and Freddie have “gotten worse, not better,” Calabria said, pointing to a “massive expansion” of loans with high debt-to-income ratios in recent years. “What you’re describing today sounds even more dangerous than the conditions that we had prior to the last crisis,” Sen. Martha McSally (R-Ariz.) said. “How is it that reforms haven’t been made in order to prevent us being in similar conditions?” Carson said reforms at the Federal Housing Administration have brought down delinquency rates. Efforts to reduce risk, though, would inevitably result in fewer people getting mortgages — a point Democrats on the committee made repeatedly. When Sen. Jack Reed (D-R.I.) pressed the officials to identify people who would not be able to get mortgages under the plan, Mnuchin said “there may be certain people today who really shouldn’t get a mortgage because they can’t afford them.” Carson agreed. “Certainly there are some people who probably should not be mortgage owners — in many cases very disabled people, elderly people, people who are drug-addicted, who are not going to be able to make the payments,” Carson said. “We have other programs for individuals like that." Read more: POLITICO

What? 😂 Fannie & Freddie are the only working profitable parts of US Govt🇺🇸. Someone move the GOP away from this one & Be quick! They’ve no conceivable notion of how any of it works & they’ll guck it up badly lol RepublicansForFiscalResponsibility **This isn’t your dad’s GOP Way to manipulate the market

This is where it all started a dozen years ago. Govt. backed players in the 2ndary mtge mkt allowed to grow far beyond their charters. Couldn't make bad loans fast enough, bought bundles from others, all to meet quotas set by politicians. Churning out AAA securities that aren't. That’s tedcruz in a year. Maybe less.

Omg! Blame Republicans. And then the trap doors open. Mayhem again...

Controversial Trump aide John Bolton exits WH knocking TrumpPresident Trump has fired controversial National Security Advisor John Bolton on Twitter, after they ‘strongly disagreed.’ Sparking more controversary, Bolton offered a different recount, saying he previously ‘offered to resign.’ Former Obama official Richard Stengel argues ‘the problem with replacing Bolton’ is ‘when someone leaves the Trump administration, they’re never replaced by a better actor.’ stengel Ummm, you got shitty windows MSNBC. honestelaine stengel He WILL be replaced by someone who is not. stengel MSNBC sucks BERNIE SANDERS 2020

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Trump GOP primary challenger Mark Sanford says growing field of Republican candidates strengthens anti-Trump messageFormer South Carolina Gov. Mark Sanford, who announced this weekend that he will launch a longshot primary bid for the 2020 Republican nomination, argued Monday that the growing field of Republicans challenging President Donald Trump strengthens their anti-Trump message. And Trump will win South Carolina in a landslide victory. This truly is a nothing burger. The President is mad at VP Pence. Trump said, “I KNEW NOTHING! THAT IDIOT! HE’S NOT THE PRESIDENT! HE COULD HAVE STAYED AT CLONMORE LODGE FOR $58! DAVE! NOW YOU SEE WHY I WANT TO REPLACE HIM ON THE TICKET! STUPID HICK! HE ALWAYS PISSES ON THE FLOOR OF MY BATHROOM! I HATE PENCE!” Hahahahahahaha, stop my stomach, hahahaha. Wait, he’s serious? Hahahahaha MarkSanford

Matthews: You can’t separate Trump Inc. from the Trump presidencySince Pres. Trump took office, his properties have earned over $5 million from political candidates, according to The New York Times. Between 2011 and 2014, the president's properties earned $119,000 from political spending. What is your deal with Andrew Yang. You guys are supposed to be good with details. Figure it out. A.S.S.--ALLEGATIONS SPECULATION SMOKE-FAKE NEWS. any crime? any evidence? nothing but a.s.s. Okay but whoisjohnyang

A JPMorgan bot analyzed 14,000 Trump tweets and found they have a 'significant' impact on marketsThe bank's 'Volfefe Index' found that words like 'China,' 'billions,' 'dollar,' 'tariffs,' 'trade,' and 'Mueller' were triggers that moved markets. A robot ? AI ? Something programmed by a human ? Take it a decades. Maybe even years. No impact. (My opinion) No shit Sherlock.

After Trump Calls Off Talks, Afghanistan Braces for ViolencePresident Trump’s decision to break off peace talks with the Taliban, at least for now, left Afghanistan bracing for a bloody prelude to national elections this month Taliban reforming...They'll be releasing a new Album and touring the USA...Tickets on Ebay.



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