Dr. Housing Bubble 11/07/09

[Crewleader]

Fannie Mae and Wells Fargo Announce Creative Mortgage Solutions: A New Thing Called Renting. Option ARM Scenarios, Lease for Deed, and Delaying the Financial Future.

Last week, foreclosure Hall of Fame member and government stepchild Fannie Mae announced a stunning $18.9 billion loss. Remember last year when we were told that bailing out the enormous Government Sponsored Entities that we would be turning a profit? Well that didn’t exactly pan out and both Fannie Mae and Freddie Mac have been a vortex for taxpayer money. With that said, Fannie Mae announced a “lease for deed” program that will essentially convert struggling homeowners to that feared word, renters. In the same week after Attorney General Jerry Brown sent his letter to the top option ARM wheelers and dealers in California, Wells Fargo came out with its ingenious solution. Wells Fargo has decided, at least as it stands, to convert their Pick-A-Pay option ARMs into glorious interest only loans for periods of six to ten years.

The fascinating thing about the Fannie Mae initiative and the Wells Fargo program is that homeowners are converted to renters. Think about it. In the case of Fannie Mae, you explicitly sign over the deed to the organization and sign onto a yearly lease like 50 percent of California renters. Not uncommon but will people be able to cover the monthly rental rate? They are planning on going with a market rental rate but as we all know, rents are going lower in a financial limbo. Any short fall is going to be covered by the taxpayer (yet again). Why not take back the home, sell it for market value and allow the current borrowers to find a rental that is more affordable? With the Fannie Mae plan, I’m not sure how many people will take this up.

Wells Fargo – From Option ARM to Interest Only

The Wells Fargo plan is another beast altogether:

http://www.doctorhousingbubble.com/fannie-mae-and-wells-fargo-announce-creative-mortgage-solutions-a-new-thing-called-renting-option-arm-scenarios-lease-for-deed-and-delaying-the-financial-future/

[Robb]

1. Jesus.

And they think people will sign up? With landlords BEGGING people to sign leases for half what they wanted a year ago??