Why does Freddie Mac want into the home equity loan business?

SC Maintenance

SC Maintenance

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I know there is some savvy realty types here. Why does Freddie Mac - a government sponsored enterprise - want into the Home Equity loan business?

I thought Freddie's goal and the reason they get a government guarantee - was to get families into homes? How does this help that at all.

Just confused?

"“The proposed activity is intended to provide homeowners with a cost-effective alternative for accessing the equity in their homes,” FHFA Director Sandra Thompson said in an announcement of the proposal."
www.housingwire.com

Freddie Mac’s proposed home equity product could unlock $850B in originations - HousingWire

Freddie Mac's proposed home equity product could boost origination volume but might also face challenges, according to Bank of America.
www.housingwire.com www.housingwire.com
 
SC Maintenance said:
Specifically which bubble. There are a few I can think of - so I am clarifying.
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I can think of a few as well. Let me generalize and simply call it a "spending bubble". Nations and their societies all over the globe have lived beyond their means for decades now. Debt is a useful tool - until the cost of that debt becomes unsustainable.

Scott
 
CKN said:
Please elaborate.
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I love the bold letters.

It is common knowledge that many loans were given out to those to whom were known by the bank (including but not limited to):

1.) who could not afford it.
2.) who had no real down payment. (fake down payments were given by builders in front of closing agents)
3.) who had no idea what an ARM was, or was grossly misinformed of the risks of ARMs were.


Sure, people could be better learned, but when misled by the bank, or not understanding that adjustable rate ALWAYS mean the rate goes up................is not good.

The banks were given nearly 1 trillion dollars of taxpayer money 1 trillion.


does the above suffice for the bold letters?
 
bullwinkle said:
They have to be really careful not to rebuild the house of cards that caused the Great Recession of the mid-late ‘00s-too much easy money repackaged into near worthless securities. Sounds like that mistake may be happening again!
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Too late… when combined with the latest promise to turn taxpayer dollars into handouts for “first-generation homebuyers” they are going to both blow up and then burn down the housing market.

Freddie Mac wants their greedy paws on all that interest on equity loans.
 
burbguy82 said:
I love the bold letters.

It is common knowledge that many loans were given out to those to whom were known by the bank (including but not limited to):

1.) who could not afford it.
2.) who had no real down payment. (fake down payments were given by builders in front of closing agents)
3.) who had no idea what an ARM was, or was grossly misinformed of the risks of ARMs were.


Sure, people could be better learned, but when misled by the bank, or not understanding that adjustable rate ALWAYS mean the rate goes up................is not good.

The banks were given nearly 1 trillion dollars of taxpayer money 1 trillion.


does the above suffice for the bold letters?
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The term for what you described was known as NINJnA loans.

No Income
No Job
no Assets

Thanks for that housing bill that collapsed the entire economy, Barney Frank!
 
While the discussion of home equity fiascos and Ninja loans are interesting, it still does not explain why Freddie would want in to this business. Freddie is publicly traded OTC and does not pay a dividend. They have no incentive to do stupid things because it would not benefit them in any way I can see?

Hence my confusion.
 
SC Maintenance said:
While the discussion of home equity fiascos and Ninja loans are interesting, it still does not explain why Freddie would want in to this business. Freddie is publicly traded OTC and does not pay a dividend. They have no incentive to do stupid things because it would not benefit them in any way I can see?

Hence my confusion.
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Freddie (the government) is needed to keep the bubble inflating. These things have been going on for several decades. Blame both sides. Besides, it's the way the modern financial system is designed and "best" utilized. Debt is a useful tool - so long as you don't become overly addicted.

Realize, nearly all modern nations and their societies are financed with debt. Debt is what got these nations and their people many of the niceties they have now - things that were financed with debt rather than saved for and paid with actual cash assets. Debt in some form is used by pretty much every human and by all governments. Debt speeds things up.

The pace of growth and "progress" would be much slower had there been no such thing as debt. The problem is when debt no longer works because it becomes too expensive. It's at that point when things get murky. I think it's safe to say that when additional debt is no longer a viable option the standard of living for every modern society on the planet will be negatively impacted.

Scott
 
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jhellwig said:
Because home equity loans are as bad of idea as they were in the 2000s. Even more so now.
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Don't agree. Banks are now very conservative in Loan to value. If you followed any of GONS posts-he tracks multiple real estate markets across "The WEST/MIDWEST". Real Estate is not dropping by 50%-this is what it would take for banks to lose money-A 50% DROP-it's not happening.
 
burbguy82 said:
I love the bold letters.

It is common knowledge that many loans were given out to those to whom were known by the bank (including but not limited to):

1.) who could not afford it.
2.) who had no real down payment. (fake down payments were given by builders in front of closing agents)
3.) who had no idea what an ARM was, or was grossly misinformed of the risks of ARMs were.


Sure, people could be better learned, but when misled by the bank, or not understanding that adjustable rate ALWAYS mean the rate goes up................is not good.

The banks were given nearly 1 trillion dollars of taxpayer money 1 trillion.


does the above suffice for the bold letters?
Click to expand...
Your first post was a "hit and run post". An opinion lacking anything to back it up. Even if I don't agree with some of what you said-at least your provided context.
 
CKN said:
Your first post was a "hit and run post". An opinion lacking anything to back it up. Even if I don't agree with some of what you said-at least your provided context.
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Agree or not, it is what happened. Amongst other things.

I am sure there is some angle FM has or they would not be getting in to it.
 
I hate to say it but I will. I wish it would just go ahead and burst. Right now the economy is like an abscessed tooth. It's swollen and painful, and nobody but the very few dentists (in a figurative sense) are reaping any rewards off of this.

5 years ago my house was worth about 135k, now it would list for closer to 300k. A small 1225 3/2 with a 2 car garage on a lot the size of a big booger. 10 years ago it sold for less than 100k.
 
mr_boring said:
I hate to say it but I will. I wish it would just go ahead and burst. Right now the economy is like an abscessed tooth. It's swollen and painful, and nobody but the very few dentists (in a figurative sense) are reaping any rewards off of this.

5 years ago my house was worth about 135k, now it would list for closer to 300k. A small 1225 3/2 with a 2 car garage on a lot the size of a big booger. 10 years ago it sold for less than 100k.
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Freddie/Franny are having rather high delinquency rates (.25% per month is additive over time) and are being a bit flexible with what rises to the level of delinquency
holding back on foreclosures providing assistance and many creative programs to keep it rolling.
My guess is this is another extension of this behavior because the real delinquencies are getting moderately high.

Even though the current bubble is due to bad decisions made in 2018 and 2020 .gov has to keep things rolling through election season otherwise the knee jerk will likely make it worse.

As nice as it seems to have costs erode our country is so top loaded with juiced up .gov dollars ($5T shadow bank crisis) I’m uncertain if it won’t just turn into a clean sweep scenario putting everyone of accord out of work, with loss of savings to the FDIC insured amount with forced investment sitting stagnant at the top.

The vehicle loan failure + commercial business failure likely exceeds the size of the 2008 home crisis.
 
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