Yesterday Bloomberg News reported that mortgage-finance company Fannie Mae has asked for $1.5 billion in aid from the U.S. Treasury Department after a 12th straight quarterly loss.
According to the article:
"The Treasury seized Fannie Mae and McLean, Virginia-based Freddie Mac, the biggest sources of U.S. mortgage funding, in 2008 as souring subprime loans pushed the companies to brink of collapse. Including today's request, Fannie Mae has drawn $86.1 billion in aid. The growing tally has helped spur the Obama administration to solicit proposals to fix the companies, and prompted some lawmakers to demand their closure."
Fannie Mae issued many of the sub-prime mortgages that were one of the main causes of the housing bubble and the recession that has followed.
Meanwhile, The Washington Independent yesterday reported that a program initiated by the National Council of State Housing Agencies and Fannie Mae, the taxpayer-backed, government-sponsored enterprise that buys up mortgages from lending banks, will offer potential homeowners a mortgage with only $1,000 down, affordable monthly payments and no private mortgage insurance. Here we go again.
The article points out:
"But there are concerns and problems intrinsic to purchasing a home with almost no money down. First and foremost, if the housing market turns down even a fractional amount, the homeowner will go "underwater" immediately. If the price of the house falls by even a bit, he will owe more on the mortgage than the house is worth. If he needs to sell it, he needs to come up with extra cash to pay the bank back. And the fact that the homeowner only had a thousand dollars to put down in the first place implies that he does not have much financial breathing room and might default."
Have we not yet learned from our experiences???
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