November 29, 2021

Fair Game: Fannie Mae, Freddie Mac and the Same Old Song

But ours is an imperfect world, and discussions about these questions have taken place mostly behind closed doors in Washington. The rest of us Americans, who guarantee the mortgage market, have not been given much of a say.

This is a pity because the future of housing finance in this country seems to be coming down to two taxpayer-backed concepts. One is the status quo, with Fannie Mae and Freddie Mac continuing to back the vast majority of mortgages. The other is a newly conceived public guarantor with some of the same problems that got Fannie and Freddie into trouble.

Let’s begin with the status quo. The taxpayer rescue of Fannie and Freddie in September 2008 has cost $137 billion so far. While this has been paid down from an initial $187.5 billion, taxpayers aren’t likely to get their money back anytime soon. Last fall, the regulator charged with overseeing Fannie and Freddie estimated that the taxpayer bill for the companies could be $200 billion by the end of 2015.

Still, Washington has shown little interest in winding down Fannie and Freddie. The ostensible reason is that there would be no mortgage market without them; private lenders are still unwilling to make home loans that they want to hold as investments, so Fannie and Freddie still have to buy or guarantee them.

But doing nothing also serves other interests. Since 2011, any increase in the guarantee fees the companies receive when backing a mortgage goes to the Treasury, not to repay taxpayers. The companies, therefore, have become a government piggy bank.

There is another group that would prefer Fannie and Freddie to remain as is: the former executives who still receive benefits from the companies and the taxpayers who own them.

According to documents reviewed by The New York Times, $25.3 million in pension payments went to 1,785 former Fannie executives last year; an additional $12.7 million went to 871 former Freddie officials.

Had the companies not been rescued and instead filed for bankruptcy, the former executives’ pensions would be the obligation of the Pension Benefit Guaranty Corporation, financed by corporations whose plans it backs. Instead, taxpayers have been on the hook for five years.

Among the retirees receiving pensions courtesy of the taxpayer are Franklin D. Raines, Fannie Mae’s former chief executive; J. Timothy Howard, the company’s former chief financial officer; and Leland C. Brendsel, former chief executive of Freddie Mac.

All three men were ousted from their companies amid accounting scandals — Freddie’s in 2003 and Fannie’s a year later. All were paid handsomely through their tenures. Between 1998 and 2004, for example, Mr. Raines received $90 million in compensation, regulators found. Mr. Howard received $30 million over the period. When Mr. Brendsel left Freddie Mac, he was earning $1.2 million a year in salary.

Even so, Mr. Raines receives a pension of $2,639 from taxpayers each month, the documents show; Mr. Howard receives $4,395 and Mr. Brendsel $8,039. Requests for comment from the former executives’ lawyers were not returned.

The documents show that taxpayers spent $11 million last year on medical costs for 1,392 Fannie and Freddie retirees. And from September 2008 through 2012, taxpayers also spent $114 million for legal bills racked up by former executives and directors testifying in lawsuits relating to the accounting scandals or financial crisis inquiries.

These payments are governed by contracts struck before Fannie and Freddie fell, so there is little that anyone can do to revoke them. But Representative Randy Neugebauer, a Texas Republican on the House Financial Services Committee, said they made him “nail-biting mad.” He added: “Taxpayers have put all this money into these entities. The attorneys have gotten a lot richer and the executives that led these organizations before their demise are still getting big paychecks. It’s very frustrating.”

LET’S move on to the second option for housing finance that’s gaining traction. It is outlined in “Housing America’s Future: New Directions for National Policy,” a report published last month by the Housing Commission of the Bipartisan Policy Center.

While the authors of the report contend that it was intended to set a new direction for federal housing policy, its reliance on a government backstop is awfully familiar.

The report calls for replacing Fannie and Freddie with a public utility to guarantee a vast number of home mortgages against default. The loan size to be covered is unspecified, but the commission suggests that it should be less than the current Fannie and Freddie loan limit of $417,000 in most markets.

Article source: http://www.nytimes.com/2013/03/24/business/fannie-mae-freddie-mac-and-the-same-old-song.html?partner=rss&emc=rss

Bucks Blog: Monday Reading: One Cat’s 200-Mile Journey Home

January 21

Monday Reading: One Cat’s 200-Mile Journey Home

One cat’s 200-mile journey home, tips for finding rental-car deals, mortgages for fixer-uppers and other consumer-focused news from The New York Times.

Article source: http://bucks.blogs.nytimes.com/2013/01/21/monday-reading-one-cats-200-mile-journey-home/?partner=rss&emc=rss

Bucks Blog: Owning a Home, Mortgage Free

With all the painful foreclosures during the recent economic downturn, it’s easy to forget that some homeowners don’t even have mortgages. Nearly a third of homeowners — 29.3 percent of them — do not, according to a recent analysis by the real estate site Zillow.

That translates into nearly 21 million Americans who own their homes free and clear, Zillow found. By comparison, about 14 million homeowners are underwater — that is, they owe more than their homes are worth.

Stan Humphries, chief economist at Zillow, said that looking at the number of debt-free homes is important, given that the inventory of homes for sale is tight in some markets. Homeowners without mortgages may have more flexibility, and therefore be more willing to put their homes up for sale.

The number of homeowners with mortgages, though, is still high. Roughly 71 percent do, according to Zillow’s analysis. That compares with about 45 percent in 1945, and 62 percent in 1990, based on federal census data, Mr. Humphries said.

Not surprisingly, most debt-free homeowners tend to be older, since they have had longer to pay off their loans. Homeowners 65 to 74 years old are most likely to have no mortgage (21 percent), followed by 74- to 84-year-olds (18 percent).

But when looking at the various age groups, Zillow found that almost 35 percent of homeowners age 20 to 24 owned homes free and clear. Owners in that age group make up a small proportion of homeowners over all. They may have had wealthy parents who buy homes for them, or they may be young, successful entrepreneurs, the Zillow analysis notes.

Areas with higher concentrations of mortgage-free homes tend to be those where home prices are more affordable, since smaller loan amounts are easier to pay back more quickly.

Among the country’s largest 30 metropolitan areas examined in the study, Pittsburgh and Tampa, Fla., had the highest rates of debt-free owners, at 39 percent for Pittsburgh and 33 percent for Tampa.

The New York area also ranked high on outright ownership, at about 30 percent. That is because the area included in the analysis encompassed northern New Jersey, parts of upstate New York and Long Island, according to Zillow. Because of the wide area, the median home value is lower than might be expected. The median home value for the entire New York metro area is $343,100, compared with $940,800 for Manhattan alone.

Washington, D.C., at about 16 percent, and Atlanta and Las Vegas, each at 18 percent, had the lowest percentages of homeowners without mortgages.

Zillow’s analysis looked at mortgage data from TransUnion through the third quarter of 2012. The data covered roughly 800 metropolitan areas nationwide. The analysis excluded investor-owned and rental homes.

Do you own your home outright? How did you pay off your mortgage?

Article source: http://bucks.blogs.nytimes.com/2013/01/16/owning-a-home-mortgage-free/?partner=rss&emc=rss

Effort in Senate to Close Offshore Tax Havens

Opinion »

Out of a Job, Out of a House

In Room for Debate, what’s a fair way to help people who can’t pay their mortgages?

Article source: http://feeds.nytimes.com/click.phdo?i=995076bcaa96aa426db1a1de68306583

Bucks: Making the Reverse Mortgage Decision

In this weekend’s Your Money column, I look at what the decision by Bank of America and Wells Fargo to leave the reverse mortgage business will mean for the product and its future. (I actually think both will be back to originating these mortgages within a decade, but that’s another column.)

While I didn’t write much in the column about how people are using reverse mortgage proceeds these days, the sad fact is that plenty of people are using them to pay off back taxes, retire an original mortgage that they are late in making payments on or spending money on cars and vacations. Probably not the best use of the funds, but who am I to judge?

So how are you (or your parents) using the money you got from a reverse mortgage? And are you keeping the possibility of using a reverse mortgage in the back of your mind as a last-resort financial planning tool?

Article source: http://feeds.nytimes.com/click.phdo?i=50ee5f2f0c4ddaa73c83baf5866840fc