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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 126964  
Subject: Freddie Mac Bets AGAINST American Homeowners Date: 2/2/2013 4:33 PM
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Read it 'n weep.

http://www.propublica.org/article/freddy-mac-mortgage-eising...
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Author: kahunacfa Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124657 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/3/2013 12:19 AM
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What else is new -- an Agency of the Federal Government Lies? It happens all of the time. The President Lies, The Congress Lies, the IRS Lies, the CIA Lies, the FBI Lies, the US Attorney General Lies, Freddie Mac lies. Get in line and lie.

Kahuna, CFA

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124660 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/4/2013 10:17 PM
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While I think there is more to the story than Freddie Mac 'betting against homeowners' (it's called hedging your bets, since they are also providing a very significant amount of betting FOR homeowners by supplying the financing for what, 40% - 50% of the loans currently being made?), if the authors of the story had chosen a better 'victim' I might have had more sympathy.

The couple highlighted as being unable to refinance because of 'rules set by Freddie' did most of the victimizing to themselves, rather than being victimized BY those rules, IMO:

The Silversteins have a 30-year fixed mortgage with an interest rate of 6.875 percent, much higher than the going rate of less than 4 percent. They have borrowed from family members and are living paycheck to paycheck. If they could refinance, they would save about $500 a month. He says the extra money would help them pay back some of their family members and visit their grandchildren more often.

But brokers have told the Silversteins that they cannot refinance, thanks to a Freddie Mac rule.

The Silversteins used to live in a larger house 15 minutes from their current place, in a more upscale development. They had always planned to downsize as they approached retirement. In 2005, they made the mistake of buying their new house before selling the larger one. As the housing market plummeted, they couldn’t sell their old house, so they carried two mortgages for 2½ years, wiping out their savings and 401(k). “It just drained us,” Jay Silverstein says.

Finally, they were advised to try a short sale, in which the house is sold for less than the value of the underlying mortgage. They stopped making payments on the big house for it to go through. The sale was finally completed in 2009.

Such debacles hurt a borrower’s credit rating. But Bonnie has a solid job at a doctor’s office, and Jay has a pension from working for more than two decades for Johnson & Johnson. They say they haven’t missed a payment on their current mortgage.

But the Silversteins haven't been able to get their refi. Freddie Mac won’t insure a new loan for people who had a short sale in the last two to four years, depending on their financial condition. While the company’s previous rules prohibited some short sales, in October 2010 the company changed its criteria to include all short sales. It is unclear whether the Silverstein mortgage would have been barred from a short sale under the previous Freddie rules.
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“We’re in financial jail,” says Jay, “and we’ve never been there before.”


So, as they 'approached retirement', they bought their retirement home without selling their 'upscale' home, and without having financial resources to be able to make both mortgage payments without having to raid their 401(k)s and borrow from family/friends. Since purchasing the 2nd home, he apparently retired, since 'Jay has a pension from working for more than two decades for Johnson & Johnson', further degrading their ability to pay for their home, so that now they feel like they are in 'financial jail'.

If they are in 'financial jail', it's one they put themselves in. Anyone who buys a 2nd home without having a solid plan to pay for all the debt (including, but not limited to - pricing the house aggressively, dropping the price aggressively if it's not selling, having money to bring to the table if necessary to sell the house, remaining employed instead of retiring or getting another job after retirement) needs to recognize that their decisions have consequences - in this case, they cannot refi until enough time has passed after the short sale (anywhere from 2 - 4 years, according to the article).

While the current, more restrictive, rules on borrowing after a short sale we not in place when the short sale in this case occurred, it is still likely that this couple would have qualified to borrow shortly after the short sale even under the old rules, as they were delinquent on the payments on their short sale home at the time of the sale. If they had been able to do so, they had at least 9 months in 2010 when they could have done so before the new rules went in place. And, in an attempt to show additional victimization, you can bet that the article would have trumpeted that the couple would have qualified under the old rules if it had been able to. Instead, it says "it is unclear" whether they would have qualified under the old rules.

And guess what? Their parole from jail is almost here. Enough time has passed since their short sale in 2009 (4 years ago) that they should be able to qualify for a new conventional mortgage sometime this year, if their credit scores will support it. (Possibly, more of those consequences from the actions they took.)

AJ
- has purchased houses before having sold the previous house 5 times, and, as a consequence, carried mortgages on 2 homes for anywhere from 20 days to 3 1/2 years, but has never had to do a short sale, miss a payment or dig into a 401(k) to make any mortgage payments

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124661 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 10:56 AM
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While the current, more restrictive, rules on borrowing after a short sale were not in place when the short sale in this case occurred, it is still likely that this couple would have qualified to borrow shortly after the short sale even under the old rules, as they were [not] delinquent on the payments on their short sale home at the time of the sale. If they had been able to do so, they had at least 9 months in 2010 when they could have done so before the new rules went in place. And, in an attempt to show additional victimization, you can bet that the article would have trumpeted that the couple would have qualified under the old rules if it had been able to. Instead, it says "it is unclear" whether they would have qualified under the old rules.

Here are the Freddie Mac guidelines for seasoning of various derogatory events.

http://www.freddiemac.com/learn/pdfs/uw/caution_remind.pdf

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124662 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 11:13 AM
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Frankly, I'd bet against that couple too, if I were a lending institution. Good think I'm not or there would be even less credit than there is now.

Just because you WANT to own a home or WANT a better interest rate, doesn't mean you get one.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124663 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 12:17 PM
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it is still likely that this couple would have qualified to borrow shortly after the short sale even under the old rules, as they were [not] delinquent on the payments on their short sale home at the time of the sale.

Sorry, your attempt to change my statement to state that the couple was not delinquent on the short sale home when they sold it is contradicted by the article, which says:

Finally, they were advised to try a short sale, in which the house is sold for less than the value of the underlying mortgage. They stopped making payments on the big house for it to go through. The sale was finally completed in 2009.

If they weren't making payments on the 'big' (i.e. short sale) house, they were delinquent on it.

In addition, there is the timing cited in the article, which states that they bought the 2nd house in 2005, and 'carried two mortgages for 2½ years'. 2 1/2 years after 2005 would, at most, be sometime in mid-2008. Since the short sale didn't go through until sometime in 2009, they missed at least 6 months of payments - meaning they were delinquent on the loan.

Here are the Freddie Mac guidelines for seasoning of various derogatory events.

Thanks for the link to the current rules. Since the brokers that the couple has spoken to have told them that nearly 4 years after the short sale, they still don't qualify to refi their current home due to the short sale on their previous home, those brokers must have also concluded that the couple's short sale was due to 'financial mismanagement', as the other option of 'extenuating circumstances' would have let them qualify only 2 years after the short sale.

Do you have a link to what the old rules for qualifying after a short sale were in 2009, so we can see if a couple with delinquent payments at the time of the short sale would qualify for a mortgage?

AJ

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124665 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 2:57 PM
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Original: it is still likely that this couple would have qualified to borrow shortly after the short sale even under the old rules, as they were [not] delinquent on the payments on their short sale home at the time of the sale.

Sorry, your attempt to change my statement to state that the couple was not delinquent on the short sale home when they sold it is contradicted by the article, which says:

Oh, my apologies. I thought you left a word out that made your statement make sense. If they were in fact delinquent at the time of the short sale, they wouldn't have qualified for a conventional dog house--even under the old rules. Had they NOT been delinquent, they MIGHT have qualified immediately, for example, for a new FHA loan.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124666 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 3:03 PM
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Do you have a link to what the old rules for qualifying after a short sale were in 2009, so we can see if a couple with delinquent payments at the time of the short sale would qualify for a mortgage?

The new guidelines show what the old guidelines were. See page 5 under matrix, "Action--Time Period After Pre-Foreclosure Sale," "Current Requirements" and "New Requirements."

In the past, a short sale was considered just like a foreclosure but not specifically stated as such. Only as a result of the recent financial/real estate meltdown has a distinction been made between "pre-foreclosure" (short sale) and "foreclosure."

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124667 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 3:05 PM
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Here are Fannie Mae's guidelines. Very similar to Freddie Mac.

https://www.fanniemae.com/content/announcement/0816.pdf

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124668 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 3:10 PM
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From the article: Those homeowners have a lot at stake, too. Many of them could cut their interest payments by thousands of dollars a year.

Even HARP (Home Affordable Refinance Program) loans have failed to help the hundreds of thousands of American homeowners HARP was designed to help. Why? Because many homeowners have a 2nd behind an underwater 1st and the 2nd won't subordinate. Thus, homeowners are stuck in mortgage jail, unable to take advantage of historic low rates.

Just because the government devises a program doesn't mean lenders are going to implement the program as devised, or implement it at all.

Unless one is actually in the trenches, talking to homeowners and analyzing their situations, criticism of their circumstances is speculative at best and cruel at worst.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124669 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 3:12 PM
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Here are the FHA guidelines regarding short sale.

http://shortsaleteaching.com/blog/hud-releases-new-fha-guide...

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124672 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 7:04 PM
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Even HARP (Home Affordable Refinance Program) loans have failed to help the hundreds of thousands of American homeowners HARP was designed to help. Why? Because many homeowners have a 2nd behind an underwater 1st and the 2nd won't subordinate.

HARP loans are not where I generally do my originations, but over the past couple of years I've probably done 30 to 40 of these loans. My work colleagues do much more of these, and I'm familiar with the program. From what I've seen, not one HARP eligible loan originated had an issue with a 2nd trust lender refusing to subordinate. I would have guessed that the 2nd lender kind of had to go along on a refinance of a 1st thru HARP, but I don't know, and that would only be a guess. But I've not seen subordination of 2nds to be an issue.

Thus, homeowners are stuck in mortgage jail, unable to take advantage of historic low rates.

Those stuck in mortgage jail, or not being able to refinance to a lower rate, are more liklely people who unfortunately, and through no fault of their own, did not have their original mortgage sold to Fannie or Freddie. It could easily have been A paper at time of origination, but many mortgages were grouped and sold as Mortgage Backed Securities. Those homeowners are stuck because their loan is not owned by Fannie or Freddie, and are not eligible for government sponsored HARP program.

Guess what I find confusing is your stance on HARP loans. You like the idea of HARP, a government program to help existing homeowners? You would like to see the program expanded? Or, you're opposed to the role government is playing? Whatever the political side you fall on, there is no argument that the HARP program has helped hundreds of thousands of people who would not have been able to refinance (due to high LTVs) actually capture lower interest rates. At that same time, it's been a financial windfall for those in the mortgage industry, from originators to processors to underwriters. Truthfully, when the market froze in 2008/2009 I wasn't sure what kind of a living I would be making in the next few years, or even if originating loans would continue as viable employment. Government intervention did bring liquidity back into the marketplace. Some may argue it was the government programs that initiated the financial collapse of 2008, but I'm of the belief there was more than one player involved with that. What is certain, is that the U.S. government played a huge role, and still do, in supporting the housing market and mortgage industry.

Unless one is actually in the trenches, talking to homeowners and analyzing their situations, criticism of their circumstances is speculative at best and cruel at worst.

Here's a comment we can both agree on. You said it, and I agree with your statement, so were in agreement. Would you also agree that it can be applied to many situations outside of home loans? I've read some of your posts on other boards and it's clear you have no tolerance for those on welfare, collecting unemployment, or receipients of food stamps. Perhaps you need to get into those trenches and learn their situations, to build some empathy and understanding.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124673 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 7:18 PM
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Would you also agree that it can be applied to many situations outside of home loans? I've read some of your posts on other boards and it's clear you have no tolerance for those on welfare, collecting unemployment, or receipients of food stamps. Perhaps you need to get into those trenches and learn their situations, to build some empathy and understanding.

The downfall of America began with the New Deal. The New Deal was a series of economic programs enacted in the United States between 1933 and 1936. They involved presidential executive orders or laws passed by Congress during the first term of President Franklin D. Roosevelt. The programs were in response to the Great Depression, and focused on what historians call the "3 Rs": Relief, Recovery, and Reform. That is, Relief for the unemployed and poor; Recovery of the economy to normal levels; and Reform of the financial system to prevent a repeat depression.

But the Dems didn't think it through, did they? Math always wins. There were only 1.75 full-time private-sector workers in the United States last year for each person receiving benefits from Social Security, according to data from the Bureau of Labor Statistics and the Social Security board of trustees.

According to the Social Security board of trustees, there were 41.9 "covered workers" per Social Security beneficiary in 1945.

Back to HARP loans. If banks, as quid pro quo for being bailed out, had been forced to refinance anyone who qualified (meaning, current on their payments) to historic low interest rates, the resulting improvement to the household cash flow of millions of Americans would have bailed us out of the recession, which is ongoing to this day.

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124674 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 7:20 PM
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It's helpful to her industry, so she likes it. That's a normal human bias I think. Narrow, but normal.

Personally I think this country subsidizes housing WAY too much. Renting is a perfectly fine option, and one many people would be better off considering rather than contorting themselves to try and force buying a home. This couple sounds like one who should have sold their house, rented a while and bought another one when and if they could afford it.

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124675 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 7:28 PM
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Back to HARP loans. If banks, as quid pro quo for being bailed out, had been forced to refinance anyone who qualified (meaning, current on their payments) to historic low interest rates, the resulting improvement to the household cash flow of millions of Americans would have bailed us out of the recession, which is ongoing to this day.

Wow, we're in agreement twice. Agree that the purpose of HARP was to provide debt relief and increase cash flow for homeowners, providing them additional dollars in the pocket each month. So, you're in favor of HARP? Because it does force banks to refinance underwater homeowners who are current on their mortgage payments. And if I understand correctly, you prefer the government to have stepped in with a morer forceful and larger role, and dictate to private banks that they refinance any mortgage that would qualify under HARP, even the loans owned by a private investor and not owned by Fannie or Freddie. All in the name of stimulus. Are you sure you didn't leave your Fool password on a stickey note next to the laptop?

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124676 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 7:36 PM
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It's helpful to her industry, so she likes it. That's a normal human bias I think. Narrow, but normal.

Nope. HARP is/was a way to stimulate the economy that doesn't cost the taxpayer anything if implemented properly.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124677 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/5/2013 7:39 PM
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So, you're in favor of HARP? Because it does force banks to refinance underwater homeowners who are current on their mortgage payments. And if I understand correctly, you prefer the government to have stepped in with a morer forceful and larger role, and dictate to private banks that they refinance any mortgage that would qualify under HARP, even the loans owned by a private investor and not owned by Fannie or Freddie.

Nope. Bankers were waaaaay too short-sighted. Instead of voluntarily refinancing homeowners who were ontime with their payments, they're now awash in foreclosures--a kind of musical houses similar to musical chairs.

I would have preferred the government to be completely hands off instead of trying to manipulate by "stimulating" the economy. Put an incompetent community organizer in charge of it all and disaster ensues.

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124679 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/6/2013 12:45 AM
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HARP is/was a way to stimulate the economy that doesn't cost the taxpayer anything if implemented properly.

Does the taxpayer suffer when savings yields are artificially depressed?
Does the taxpayer suffer when incapable borrowers are propped up & extended before their collapse?
Does the taxpaying home buyer suffer when the markets are artificially propped up at higher levels than actual fundamentals support?

TANSTAAFL...
Somebody always pays...
When its artificial market manipulations, its usually the taxpayer/citizen, in the end.
Dave

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124680 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/6/2013 1:59 AM
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CC wrote: HARP is/was a way to stimulate the economy that doesn't cost the taxpayer anything if implemented properly.

Dwdonhoff wrote: Does the taxpayer suffer when incapable borrowers are propped up & extended before their collapse?

I said "...if implemented properly." What's "incapable" about a borrower who, through no fault of his own but because of bank shenanigans is upside down on his mortgage yet current in the payments?

"Implemented properly" means that banks, of their own volition, should refinance these borrowers. It would be quid pro quo for being bailed out by the taxpayers in spite of their shenanigans. Thousands of American homeowners, despite being current in their payments, are paying thousands more annually in interest because they choose to honor their contract with the bank. Something's not right with that picture.

In other words, the banks should have come up with their own HARP program, not the government.

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124688 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/6/2013 6:22 PM
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CCinOC: '"Implemented properly" means that banks, of their own volition, should refinance these borrowers. It would be quid pro quo for being bailed out by the taxpayers in spite of their shenanigans.'

"own volition" and "quid pro quo" do not compute.

Regards, JAFO

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124689 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/6/2013 7:53 PM
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"own volition" and "quid pro quo" do not compute.

That's your opinion. The lending community--the Agencies in particular--could have bailed itself out in exchange for government backing off from ordering Lender A to buy Lender B and so on. As it is, the "too big to fail" banks are now bigger than ever.

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Author: MetroChick Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124701 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/7/2013 1:48 PM
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Last year, as a renter I paid an effective fed tax rate of about 18%. This year as a mortgage holder (I don't want to say "homeowner", since I don't feel I own my home while the mortgage is far greater than my equity) my effective fed tax rate is about 13%.

Since Freddie Mac is taxpayer funded - whose interests should they be looking out for more - renters, who pay higher fed taxes - or mortgage holders/homeowners who fund goverment at a lower rate?

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124702 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/7/2013 3:44 PM
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Since Freddie Mac is taxpayer funded - whose interests should they be looking out for more?

The Agencies have no interest in the well-being of renters, even though renters are also American taxpayers.

How do I know this? From ongoing email correspondence with a representative of Fannie Mae.

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124724 of 126964
Subject: Re: Freddie Mac Bets AGAINST American Homeowners Date: 2/11/2013 9:10 AM
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Unless one is actually in the trenches, talking to homeowners and analyzing their situations, criticism of their circumstances is speculative at best and cruel at worst.

I humbly suggest that it's usefully educational at best.

xtn

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