I am from the government and I am here to help you. That punch line seems to be coming more and more true these days. Fannie Mae and Freddie Mac were taken over by the federal government in bankruptcy receivership in 2008. Fannie Mae and Freddie Mac, along with FHA and VA make up almost 100% of mortgage lending in our country. I would not say that the mortgage industry has been socialized, but it certainly is dominated by government. In the last four years the big government stamp on the mortgage process is undeniable and is the sole reason people scream bloody murder at their mortgage lenders during the process.
Below are some exact reasons you can thank the Feds for your mortgage nightmares:
Fannie Mae and Freddie Mac, who are broke let’s not forget, have been making lenders buy back loans at an increasing rate. When you are losing money as a business, you want to do less business, or even close your doors. But thanks to we taxpayers, Fannie and Freddie stay open (and give out handsome bonuses apparently), but aim to be as strict as possible, to limit business, which in turn limits their losses. Fannie and Freddie are owned and run by the federal government. Thanks federal government.
Tough new rules
When the Consumer Financial Protection Bureau announces tough new rules aimed at the mortgage industry, you’ll know another reason lenders have to get more and more strict on underwriting. So if you applaud the Consumer Financial Protection Bureau dropping the hammer on the mortgage industry, remember that when it comes time to apply for a mortgage, and the Consumer Financial Protection Bureau has mortgage lenders running for cover. Thanks federal government.
Fines and penalties
If you smile at the thought of banks paying fines and penalties over the alleged robo-signing foreclosure lawsuits brought by many revenue and attention seeking states attorneys and the administration, remember the impact that has on banks bottom line, their desire to even do mortgages, and their need to tighten guidelines more and more to avoid future problems. Thanks federal government.
Community Reinvestment Act
The current administration has made lending harder by its relentless pursuit of banks through the Justice Department using disparate-impact lawsuits to force more loans under the Community Reinvestment Act. The safe play for banks is to withdraw from lending more and more, which many have done fully, and some partially. Thanks federal government.
The list of ways the Feds make it tough and expensive on banks to deliver mortgages is even more lengthy, but I am writing a blog, not a book. All actions have consequences. So please think about who the responsible party is when your lender says their underwriter has a laundry list of loan approval conditions for you to fulfill 3 days before settlement, most of which you think are totally unnecessary. Don’t curse your lender, nor the underwriter, thank your federal government.