Loophole Leaves Taxpayers on the Hook for Earthquake Damage

The vast majority of homes in earthquake-prone areas lack any insurance protection against earthquakes, exposing American taxpayers to hundreds of billions of dollars of risk if disaster strikes. And while some lawmakers, including Rep. Sean Duffy and Sen. Tim Scott, are urging policymakers to address the problem, Congress has yet to enact reforms. The crux […]

Fannie Mae, Freddie Mac, and Earthquake Insurance for Mortgages

Could taxpayers be on the hook for yet another bailout? Representative Sean Duffy and Senator Tim Scott asked the Federal Home Finance Agency to provide information on the exposure of earthquake damage losses facing Fannie Mae and Freddie Mac GSEs (government sponsored enterprises).  The GSEs do not currently oblige mortgage borrowers to insure the mortgages against […]

Spending Habit Can Tee up Another Bailout

Two of the largest US institutions are at risk of going wobbly.  Fannie Mae lists $3 trillion and Freddie Mac lists $1.7 trillion  in securitized mortgages that they sold to banks usually with guarantees.  According to some sources, their impressive performance in recent years may be drawing to a close and their federal masters have […]

Expecting a Crush of Lenders for Low Down Payment Mortgages?

The most prominent obligation for federal bank regulators – the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Controller of the Currency – is to avoid another taxpayer bailout as happened in 2008. The Troubled Asset Relief Program (TARP) infused $250 billion into banks to stabilize them.  The program was embarrassing to banks […]

Handling the Return of Housing to the Private Sector

The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) buy mortgages from banks and thrifts then securitize them for sale.  These mortgage backed securities are more attractive to investors than raw mortgages because they don’t need servicing and are easier to buy and sell.  In this way, Fannie […]

Fannie Redux – There They Go Again

During 2004-2007, Fannie Mae and Freddie Mac stockpiled mortgages, many from the widespread practice of “liars loans” (i.e., no-documentation or low-documentation applications that skipped over validating income that could support the mortgage being sought).    Liars loans were consistent with Congress’ exhortations that the mortgage lenders bend over backwards to help low-income families attain home ownership.  […]