Fannie Mae/Freddie Mac Bailout?

I wake up this morning and after putting the cinammon rolls in the oven I open my laptop to check FoxNews.com as I do every morning. One of the headlines is a possible government bailout for both Fannie Mae and Freddie Mac. One that could take place as early as today and cost the tax payers up to $25 BILLION DOLLARS. This to me is a bad deal all the way around.

First of all the real estate crisis was in full swing last year. Both companies knew what was going on and the impact it was going to have on the economy and their companies. I am sure they were well aware of the ramifications long before we, the public, were. That being said the CEO's of the companies took in $11.6 mi and $18.2 mil in salary, bonuses, and stock options in 2007. Now the only conlusion I can come to is that they really don't care about what was happening to the every day people and want to get as much money as they could while they could.

Now there is a record 9% of the 4 million homeowner's who are either behind on their payments or are in foreclosure. I put the blame squarely on the shoulders of Fannie Mae and Freddie Mac. Anyone who applied for a mortgage or talked to someone about mortgages in the past 5 years will tell you how easy it is to get one.

The mainstream mortgage loans (loans that most people with decent credit obtain from places like Wells Fargo, Countrywide, etc.) use guidelines for their loan approvals. Guess who issues the guidlines that are to be followed? Both of the Big Mac's. As long as the lenders follow their guidelines for loans then the Big Mac's (I got tired of typing both their names) will buy the loans from the lenders. You may make your payments to Countrywide but one of the Big Mac's is the one who really owns your mortgage. The company you make your payments to is just the servicer.

Now I've been in real estate for 10 years now. My first 5 years was at Regions Mortgage in Montgomery. I knew those guildelines forwards and backwards at the time. They were always changes with new updates from the Big Mac's but pretty much the same over that time period. We had the no income loans where you didn't have to prove your income but your credit had to be astronomically high. If you wanted to buy a house with no money down you again had to have credit out of this world and show that you had the reserves and money to make your payments.

At some point down the road I think someone must have gotten greedy. The guidelines for the Big Mac backed loans started getting very laxed. I think in some cases guidlines were just thrown out the window. Have a credit score of 585 and want a mortgage with no money down? No problem. Is the monthly payment more than 50% of your total monthly income? Who cares, let's get you in this house. I have seen this happen time after time again. For the past 5 years I worked on the title side but I get to see the final loan package that shows the loan application with their income and debt. I see their Note and how much they're borrowing along with their rate and payments. Sometimes they even included their credit report or a document had their scores on it. Most of these people had no business getting loans.

The laxed guidelines also helped those people who wanted to buy second homes or investment properties. No money to put down? So what. We'll even let you get a loan that you only pay interest payments for up to the first 10 years. They wanted to make it as easy as it could possible so those people who get in to a vacation home. It helped the investors rack up 5 investment properties at a time.

Now it was good for a while. Especially where I live. Property values were low. Investors started buying up condos and flipping them in a month or two or even less and making $50k a pop. We saw condos being flipped 5 times. It over inflated the value of our homes. The laxed guidelines was the conduit for this to happen. Now I live in an area where we've had over 2500 people who had foreclosures filed just last year. This year I can't give a solid number but I'd say we're up to 2000. I haven't kept up with it in the past 3 months so that's conservative.

The Big Mac's made it where first time homebuyer's dreams could come true. They got greedy and now we're the ones suffering. They put us in homes we could not afford when it was apparent at application. They caused investors to go into certain areas and take out these crazy risky mortgages and continue to flip the loans again and again. Mortgage loan officers looked the other way when they knew that Joe Blow was buying 5 properties at one time so they wouldn't all show up on his credit if he bought them spaced apart. You see Joe Blow couldn't afford 1 property and even if he could the 5 propeties would certainly not go through.

So while it is not entirely the Big Mac's fault they are the ones that started it. I believe it was caused either by greed on their parts, because for a while it was good, I mean really good for them or perhaps they thought that it would help more people get into homes or perhaps they thought it would help stimulate the enconomy (now if that's the case it's the stupidest reason ever because things were good before they got involved).

I don't think the government should bail them out. I don't think that I should have to help pay part of the $25 billion dollars to bail them out. Major companies go bust time and time again. Why is this different? I would like to see a detailed report on what would happen if they were left on their own. It couldn't be any worse than it is now. I think it was $3 trillion in loans that have been foreclosed on this past year. Let them deal with it. Yes, they are a publically traded company that is government backed. But how can we continue backing companies that have made one bad decision after another? We have a president that makes $250k a year and yet the Big Mac CEO's make almost 73 times the amount of the leader of our country?

Let them fail. They have failed so many homeowner's. Most homeowner's don't have a clue how the process really works. They just know they go apply for a loan from a bank and need to provide this, this and that. They don't know the rest that goes on. But for those in foreclosure I think it was ultimately the laxed guidelines that helped cause it. For those who lost jobs because of the economy, well, the housing crisis is the main reason our economy has gone to hell in a hand basket and the housing crisis began when anyone off the street could get a loan.

Okay, enough about my tirade. I'm just frustrated. We've personally been hit by the whole housing crisis. We've had now 18 individually owned houses on our street go into foreclosure and 34 builder owned homes in foreclosure in our subdivision this year alone. When is it going to stop?