AlyssaKatz.com

Oh, boy

What’s more troubling than a world in which all home loans come from Bank of America and Wells Fargo? One where Fannie Mae and Freddie Mac guarantee lines of credit for smaller mortgage bankers, which is what the Mortgage Bankers Association is now asking the Federal Housing Finance Agency to do.

Today’s Journal also has a story about how default rates for FHA-insured mortgages are rising fast, and that should give you an idea of what’s at stake here. Most FHA lenders are the very kinds of institutions that are now seeking the Fannie/Freddie guarantee on their credit lines — mortgage banks, which don’t do any other kind of business and therefore don’t have deposits or any other sources of funds to turn to. While many mortgage banks are solid and valuable institutions, over the last few years mortgage brokers seeking to increase their profit margins have also opened up their own banks, and quite a few mortgage banks are basically new incarnations of sleazy subprime loan mills.

So let me get this straight: the credit markets won’t take the risk of guaranteeing warehouse lines of credit for mortgage bankers, but the federal government should?

March 31st, 2009 | Tags: Fannie Mae, FHA, Freddie Mac, Mortgage Bankers Association
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